Impact Of Debt Maturity On Investment Efficiency In The Context Of Political Connection

The investment efficiency is the key factor that determines the development of the companies, which is the focus attention of academics and practitioners. In particular, China is currently in the period of transformation, the pace of economic growth slowed down and business management is facing more and more challenges, so the investment efficiency is particularly important. However, because of corporate investment is affected by factors in all directions, it’s difficult for the company to follow the established standards to make the best investment, so the phenomenon of inefficiency investment is widespread in the enterprises of our country, which restricts their survival and development, makes them suffer huge losses and even risk of bankruptcy. Therefore, to improve the efficiency of the company’s investment has been become an urgent task.Investment and finance are regarded as two basic activities of enterprise. Existing studies show that debt financing has two effects:on the one hand, the debt financing has the effect of governance which is used to restrain over investment; on the other hand, the debt financing also has effect of agency costs, triggering asset substitution or under investment. All the above are inspected from the perspective of capital structure, which is the direction of most studies today. However, as a result of both the effect of agency costs and the effect of governance are influenced by debt maturity structure, so debt maturity is a factor that can’t be ignored. Finally, we aim to break through the traditional research direction, starting from the debt maturity structure, to study its impact on investment inefficiency. In addition, in order to make the research closer to reality, we combine the common phenomenon of political connection to study the influence of debt maturity structure on the investment efficiency.The research carried out in this paper mainly includes three aspects, Firstly, by teasing the dynamic of domestic and foreign research; we made a review and raised the study question. Secondly, our paper mainly based on several theories, just as principal-agent theory, asymmetric information theory, free cash flow hypothesis, signaling theory and credit rationing constraint theory. Then the paper wants to explore whether the influence of debt maturity structure on investment efficiency has been changed in the background of political connection. What’s more, we made subdivision in political connection, then we proposed 10 assumptions and established 10 multiple regression model. Thirdly, we took the private companies which are listed in the A-share of Shanghai and Shenzhen exchanges during 2007-2013 as samples, studied the impact of debt maturity on corporate investment efficiency in the context of political connection by use of stata12.0. Finally, we drew conclusions and gave some suggestions.The results show that:Firstly, shorten debt maturity can inhibit over investment, which played a governance role; Secondly, shorten debt maturity can exacerbate under investment rather than relief it; Thirdly, political connection can weaken the influence of short term debt on over investment; Fourthly, political connection can relief the influence of short term debt on under investment; Fifthly, the adjust effect of official type of political connection is significant between debt maturity structure and inefficient investment. However, the adjust effect of political connection which is means some senior executive is NPC deputies or CPPCC members is significant only between debt maturity structure and under investment. This paper provided a basis for corporate financing decision-making, and revealed the political connection is like a "double-edged sword", which has a certain reference value for both government and the private companies.