The Empirical Research On The Relationship Between Trade Credit And Inefficient Investment

Since the reform and opening up, our country has carried on four major adjustment about investment management system. A hat-trick of investment, has made great contribution to leading the economic development for more than 30 years. In 2014, China’s economy showed a distinctive features: downward pressure. Although the adjustment of economic structure and changing the pattern of economic development is the country’s current policy, however, at this stage, the promoting function of investment to economic growth remains large. Therefore, enhancing the efficiency of investment also can fundamentally improve the quality of economic growth in China. On macro level, excess capacity and redundant construction is serious. On the micro level, governance mechanism caused by imbalance, lacking of constraints and supervision and so on, the problem of inefficient investment commonly occurs. What trigger the inefficient investment of listed companies? Is our country enterprise overall investment excessive or insufficient investment? How to govern the inefficient investment in corporate? Around these problems, academia has launched a wide range of discussion and research in recent years. Operating, investing and financing are the three most important financial activities of enterprise s, they are both independent and interrelated, especially the financing and investment, their relationship is more difficult to split. In 1960s-1970 s, scholars put the financing and investment decisions together to study the influence of various financing behavior on investment decisions on the whole. Debt financing is one of the most important financing way, its effect on enterprises investment behavior has become the focus of financial theory research.About the debt’s influence on the enterprise investment, the west has accumulated the rich research achievements, our country has also made some ones in this field. As an important source of debt, trade credit has a dual role in financing and governance. Most of domestic scholars separated them to study, few connected them and inefficient investment into a framework for analysis. Based on the trade credit financing function and debt’s governance effect, we study the relationship between trade credit and inefficient investment. which can provide beneficial guidance and reference on solving the problem of the current efficiency of investment.Based on the principal-agent theory, asymmetric information theory and combined with the financing constraints hypothesis, free cash flow hypothesis and the hypothesis of market competition, we study the relationship between trade credit and inefficient investment. The theoretical part comprehensively analyses the causes of inefficient investment and trade credit creation motivation. The empirical part, according to the theoretical analysis and the research hypothesis, adhering to the empirical way, using descriptive statistics, correlation test and multiple linear regression method, examines the relationship in different circumstances. In conclusion, we found that: trade credit can effectively curb over-investment, and this effect has a difference in different agency cost and market competitiveness. Trade credit can alleviate the under-investment of enterprises, and this effect for different financing constraints and the market competitiveness is different. Research conclusion is beneficial to explain the causes of inefficient investment, improving the efficiency of corporate governance and investment which has theoretical and practical significance.