Managerial Power,Debts With Different Sources And Inefficient Investment

Debt financing is the essential part of capital financing in modern enterprises.The average debt-asset ratio of the listed companies has reached 49.93%by late 2014.Scholars at abroad theoretically and empirically finding out the constraint effect of debt financing on inefficient investment.However,many researchers at home find out that debt has no complete contingent governance impact on non-efficiency investment.So it is necessary for us to study the debt governance failure under the specific circumstances in our country.Due to the status of state's being largest virtual shareholder in state-owned corporations in our country,serious issues of insider control appear.While in the private listed companies in our country,the founders of companies are not only the largest shareholders,but also master business decision-making power in companies,thus making the management has greater privilege or voice right.Under the condition of imperfect internal governance and weak external supervision,the management may adopt various ways for benefit expropriation.For instance,they may choose the financing ways and information disclosure which can maximize their own utility,which may weaken the contingent governance effect of debt.So,we need to study and find out the reason for the failure of debt governance on the basis of managerial power.Li Xinhe et al.(2014)[1]point out that operating liability is second only to internal financing and prior to financial liability in the order of liability financing.While researchers exclude operating liability or explore the relationship between debts with different sources and investment behavior in companies based on the homogeneity hypothesis of debt,which gets out of the specific conditions in our country and cannot be applied in Chinese companies.In this paper,from the perspective of different sources of debts,we collect the data from Shanghai and Shenzhen A-share to investigate the effect of debts on the inefficient investment and the effect of managerial power on the debt governance.Research results indicate that the operating liability can suppress overinvestment and alleviate underinvestment,and financial liability can also play the same role as operating liability.In addition,managerial power not only can weaken the suppressing effect of debts with different sources on overinvestment,but also can weaken the alleviating effect of debts with different sources on underinvestment.