Research On Correlation Between Financing Structure And Non-Efficient Investment

Enterprise is the cell of the national economy and investment plays a key role in enterprises because it is one of the three major finance decisions. Therefore, investment is of great significance for the subsistence and development of enterprises today and investment efficiency affects the operation conditions in significant measure. However, as for the Chinese listed companies, non-efficient investment is common among them because of agency problem, asymmetric information, incomplete contracts and so on.Research on investment efficiency is one of the most popular topics in academic and practical circles. Over-investment and under-investment are the manifestations of non-efficient investment behaviors. The scholars commonly define the “Non-efficient Investment” using NPV principle. Financing structure is an important factor that affects investment behaviors. It has theoretical and practical significance to research the correlation between financing structure and non-efficient investment behaviors..This paper reviews literatures comprehensively on the correlation between financing structure and non-efficient investment including concept definition and measurement methods firstly. Then the paper analyses the characteristics of financing structure and non-efficient investment of listed companies in Jiangsu province compared with the whole nation. Based on the previous analysis, the paper conducts an analysis of related theories and put forward the related research hypothesis. The following part is the empirical study. This paper takes non-financial listed companies from 2005 to 2014 in Jiangsu Province as research objects. The variable of non-efficient investment is measured based on the Richardson(2006) model. Then the paper makes models to test the effect of financing structure on non-efficient investment. The empirical results show:(1) Debt has a governance role to the non-efficient investment behaviors. In term of the debt resource, commercial credit has a more efficient inhibiting effect on over-investment behavior. Bank loan is more efficient than commercial credit on both non-efficient investment behaviors. In term of debt maturity, short-term debt plays a vital role in governance effect, while long-term debt has no obvious effect on non-efficient investment behaviors, which may be related to low ratio of long-term debt.(2) Over-investment degree is more serious with higher ownership concentration and does not have significant correlation with under-investment behaviors; Negative correlation between equity restriction ratio and non-efficient investment is not significant; Management shareholdings drive and affect the investment behaviors. And its correlation with under-investment is not significant. Nature of state-owned is not positively correlated with over-investment significantly.In the last part, this paper makes constructive suggestions according to previous theoretical and empirical analysis. Firstly, guarantee the hard constraints of debt in order to play a government role. Secondly, optimize the structure of debt and improve the relevant approval and management of bond system. The proportion of long-term debt can be appropriately raised. Thirdly, improve the equity restriction system to protect the interests of the middle and small stockholders. Improve the management equity incentive system and the obligation after incentives should be clear. Lastly, reform of state-owned enterprises should be continued in depth.