Corporate Governance Boundary,Debt Constraint And Investment Efficiency

Investment activity is the main driving force of the growth of cash flow and the development of the company,and it is one of the key elements to determine the value of the company.However,due to the agency problem and the imperfection of corporate governance system,most companies have the problem of low investment efficiency.The low investment efficiency of Listed Companies in China has been widely studied.Most of the researches are focused on the listed companies,using the financial data of listed companies or the information in the consolidated financial statements to investigate the impact of governance structure on the investment activities of listed companies or enterprise groups.The conclusions of these studies are based on the assumption that the number of subsidiaries will not affect the investment decisions made by the parent company(i.e.listed companies),and that the financial situation of the parent company and the subsidiaries within the same group are similar in the investment decisions.With the increase of the number of subsidiaries,the governance boundary of listed companies is expanding.However,there are few empirical studies on how the expansion of corporate governance boundary affects the investment efficiency of companies.Based on the theory of principal-agent and the free cash flow hypothesis,this paper analyzes that the expansion of corporate governance boundary can reduce the inefficient investment,and then affect the investment efficiency.In the case of debt constraint,the existing cash flow can be fully utilized within the corporate governance boundary,and the managers are more cautious in investment,which promotes the efficiency of corporate investment.This paper takes listed companies in Shanghai and Shenzhen stock markets as research samples,uses Richardson's investment index model to measure investment efficiency,manually collects the number of subsidiaries of listed companies,subdivides debt constraints from debt scale and debt structure,and establishes a multiple linear model for regression analysis of samples.The empirical results show that there is a significant positive correlation between corporate governance boundary and investment efficiency.The contribution of this paper is as follows:firstly,it provides new empirical evidence for corporate governance literature.With the popularization of the organizational forms of parent subsidiary companies and the growth of enterprise groups,it is of great theoretical and practical significance to study the consequences of expanding corporate governance boundaries.Secondly,the research complements the literature research results on the determinants of investment efficiency.Thirdly,this paper reveals the new mechanism that debt constraint affects investment efficiency and then enterprise value.