A Study On The Relationship Between Financial Constraints And Investment Efficiency Of Chinese Family Business

Family business is one of the oldest forms of business organizations in human history, at the same time is also a common form of enterprise organization in China. Family business has some characteristics such as highly controlling stakes, rapidly decision-making, high growth rate and so on, and it has great contribution to Chinese national economy and is an important cornerstone. However, the issues of financing and cash management in the growth process of the Chinese family business always exist, and they will affect business growth. In this view, under the background of "a new normal Chinese economy", to explore the family business financing constraints and investment efficiency will take on a great significance on practical and theoretical fields.In this paper, we take family business as the research object, and use the data of small board and GEM listed family enterprises from 2010-2014 as a sample. According to Baron causal step test, we construct an empirical model and use panel fixed effects regression to explore financing constraints, cash relations between holding and investment efficiency, and also examine significant existing of the mediating effect of cash holdings. Then we replace the financing constraint index and use Bootstrap methods to make robust test, and also make expansion analyses combined with family characteristics variation. Finally, the empirical results reveal the mechanisms and dynamic evolution of Chinese family business's cash holdings on the financial constraints and the efficiency of investment. Research results show that there is a negative correlation between financing constraints and cash holdings; the more cash holdings of family businesses have, more likely they will have insufficient investment; the result that cash holdings is a mediating variable of financing constraints and investment efficiency is significantly rational; With time goes by the family business holding ratio decreases, the mediating effect of cash holdings is decreasing in the gradual transform process from family business to public enterprises, while the direct effect of financing constraints on the efficiency of investment gradually increases and becomes significant, which reveals the objective restricting role of the family business investment and financing and cash management policy. These conclusions are not only rational in the whole sample of the small board and GEM board, but also significant in subsamples. In addition, the study also shows that, under the influence of family characteristics, using asymmetric information and agency theory to explain the relationship between the degree of application of investment and financing and cash holdings is not appropriate for family business. Family business investment and financing theory still needs further discussion.This paper is consist of five chapters. The first chapter is the introduction, it analyses topic bases, literature review, research methods and some other content. The second chapter analyses the family business's external financing environment constraints based on existing investment and financing theory. The third chapter proposes hypothesizes and constructs financing constraints and investment efficiency indicators which cover the family properties, and also constructs an empirical model based on causal step test. The fourth chapter is empirical research, including main empirical conclusions, robustness analysis and conclusions ductility analysis. The fifth chapter is the conclusion and prospect.