Is Leverage Promoting Or Discouraging Corporate Investment?

The rational investment of an enterprise can not only obtain corresponding benefits,improve its own value and strengthen its own strength,but also enable the resources owned by the enterprise to be properly allocated.This is also an important basis for the growth of capital flows in the future.To a large extent,it promotes the continuous development of enterprises,industries and even the entire economic system.At the same time,Investment is an element that is more susceptible to significant changes from the outside.This article selects the most common external factor,namely,leverage,and discusses the changes in corporate investment that occur when companies have different leverage rates.In this paper,"Beiqi Foton Motor Co.,Ltd"(FOTON)and "Changchun Faway Automobile Components Co.,Ltd"(FAWAY)are selected as examples.Through the relevant mechanism analysis,it is believed that the company will weigh the tax revenue of the liabilities and the cost of bankruptcy.There should be an optimal leverage ratio for investment,and the non-linear relationship between the leverage ratio and corporate investment should be a reversed "U" shape.In order to explain more clearly the relationship between leverage and corporate investment,this paper introduces the financing constraint as an intermediary variable and puts forward the hypothesis.They are assumptions 1: There is a "U" shape impact of non-linear relationship between leverage and financing constraints;Assumptions 2: There is a reversed "U" shape impact of non-linear relationship between leverage and corporate investment;Assumptions 3: There is a reversed "U" shape impact of non-linear relationship between leverage and corporate investment,in whichfinancing constraints act as intermediaries.Firstly,This paper introduced the corporate situation of "FOTON",a high-leverage company,and "FAWAY",a low-leverage company,and used corporate report data to describe the average annual leverage,financing constraints,and investment structure of the two companies.Secondly,using the 67 sets of quarterly data from 2002 to 2018 of the Shanghai and Shenzhen Stock Exchanges,the three test formulas for the intermediary effect were analyzed.Among them,the ADF test was first used to test the stability,then JJ test is used to analyze the cointegration relationship and get the cointegration equation,finally make vector error correction.Then the two cases are compared and analyzed.The empirical results show that for both "FOTON" and "FAWAY",in the long run,leverage has a reversed "U" shape impact on corporate investment,and financing constraints play a Inhibitory role of the Intermediary Effect.In the short term,The leverage will promote or inhibit financing constraints or corporate investment,which conforms to the three research assumptions proposed in the theory.Finally,this paper puts forward the opinions and suggestions of balanced leverage ratio and corporate investment,reasonable liability management and seeking the optimal capital structure,establishing the "incentive compatibility" system for managers,and establishing a more perfect information disclosure system.