Debt Financing,internal Control Quality And Enterprise Innovation Investment

According to 19 th CPC National Congress' s report,innovation can provide an inexhaustible impetus for the country's sustainable development and a solid basis for the steady growth of enterprises.Therefore,becoming an innovative country with independent innovation ability has always been the goal of our country's development.The innovation ability of enterprises can represent the innovation ability of a country to a great extent,which affects the development of economy and culture in our country.The R&D investment of product,technology or system(i.e.innovation investment)is the beginning of innovation activities,which plays an inestimable role in improving the economic efficiency of enterprises and enhancing the core competitiveness.However,compared with the developed countries,the level of R&D investment of Chinese enterprises is still relatively low.So,it is necessary to study the methods of improve the innovation investment of enterprises.When enterprises finance innovative activities,it is a good choice to borrow external funds when the internal funds are insufficient.However,once the high cost of external funds exceeds the financial position of the enterprises,the external financing activities of enterprises will be hindered.At the same time,considering the high risk of investment innovation activities and the uncertainty of return,creditors(that is,fund providers)are more cautious when investing,so they will not lend money easily.Both of these reasons make it more difficult for enterprises to obtain financial support from outside when the proportion with high debt financing,which makes it difficult for enterprises to carry out innovative activities.Internal control,as a corporate governance system,has a unique impact on the management of enterprises.High quality internal control means high level of corporate governance,while the high level of corporate governance means that the internal management of the enterprise is orderly and the information is spread smoothly.It is beneficial to urge the management to take active duty,improve the economic benefit of the enterprise,and release the positive signal with low risk ofinvestment.At the same time,good internal control construction can improve the quality of information disclosure and reduce the degree of information asymmetry between enterprises and creditors,thus enhancing the confidence of creditors to invest in innovative projects,which helps companies raise more capital with low cost.In a word,we can improve the investment intensity of innovation.This paper studies the data of listed companies in 2012-2016 and finds that: first,there is a significant negative correlation between innovative investment and debt financing.That is,when the debt financing level is relatively high,the enterprise will bear a higher pressure on debt service,which is not conducive to a new round of debt financing,thus it will be strongly constrained by the capital and will not be able to carry out R&D activities.Reflected in the low level of innovation investment,is not conducive to the promotion of the value of the company.Second,innovation investment has significant positive correlation with internal control quality.Good internal control represents a high level of corporate governance,which can reduce agency costs and asymmetric information,strengthen the supervision of the management,promote the management to carry out their duties actively,which is helpful to improve the innovative investment.Third,high-quality internal controls can ease the constraint of debt financing on innovative investment.Because good internal control represents strong profitability,low investment risk,high transparency of information,it is easier for enterprises to obtain financial support from creditors.This paper introduces the quality of internal control into the relationship between debt financing and innovative investment,which not only enriches the study of the economic consequences of internal control,but also broadens the channels to alleviate the restrictive effect of debt financing on innovative activities.Based on the conclusion of this paper,this paper puts forward some relevant suggestions on increasing innovation investment and improving innovation ability of listed companies in China:(1)Strengthening the level of construction and implementation of internal control system.(2)Establishing a good relationship between banks and enterprises.(3)Broaden financing channels.