The Influence Of Foreign Ownership On Financing Constraints Of Private Listed Companies In China

According to MM theory,the cost of the internal financing and exogenous financing is the same when the market is frictionless.However,due to the information asymmetry and agency cost in the real market,the exogenous financing cost is often higher than the internal financing cost.At this time,the high financing cost will make the enterprise give up some high-quality projects,which will cause the loss of the company's interests,that is,the enterprise faces financing constraints.In this regard,scholars have explored how to alleviate the internal and external information asymmetry and agency cost of enterprises to alleviate the financing constraints faced by enterprises from the aspects of analysts' concerns,macro policies,shareholders' nature and other factors,and obtained many achievements.However,with the deepening of China's opening up,more and more foreign investors are investing in Chinese enterprises.At the same time,private listed companies continue to have problems of bond default and equity pledge.The financing difficulty of private listed companies still exists.There are few academic researches on the influence of foreign ownership on financing constraints of private listed companies in China.In this context,based on foreign ownership and private listed companies in China,combined with the factors of financial marketization,this paper explores the following three problems: 1.Whether private listed companies generally have financing constraints;2.Whether foreign ownership can alleviate the financing constraints faced by private listed companies in China;3.Whether the impact of foreign ownership on financing constraints of private listed companies is different,with the different of financial marketization degree.Based on the discussion of these three problems,this paper first analyzes the theory of information asymmetry and the theoretical basis of agency cost.It is further explored that foreign ownership may alleviate the financing constraints faced by enterprises by alleviating the information asymmetry,agency cost and transmitting high-quality signals.The lack of regional financial marketization degree may also restrict the easing effect of foreign ownership on the financing constraints of private enterprises.Secondly,in the empirical aspect,different from the previous studies,which often use cash flow sensitivity or build a certain index to measure corporate financing constraints,this paper adopts the method of building heterogeneity frontier model.This method focuses on the investment expenditure of enterprises.Financing constraints can be defined as the extent to which the capital required for the optimal investment expenditure of an enterprise cannot be satisfied when other conditions remain unchanged.Then the distance between the actual investment level and the optimal investment level can be used to measure the degree of financing constraints.The construction of stochastic frontier model can separate the stochastic factors and get the distance between the actual investment level and the optimal investment level to measure the financing constraints.For the construction of heterogeneity model,we can explore the relationship between the proportion of foreign ownership and the degree of financing constraints.On the one hand,it can avoid the estimation error caused by the nonlinearity between cash sensitivity and financing constraints.On the other hand,it can avoid the subjective error of prior grouping to explore the composition of comprehensive coefficient.After estimating the stochastic frontier model of heterogeneity,in order to further explore the impact of financial marketization on the financing constraints of private enterprises,the samples are divided into two groups,i.e.the lower level of financial marketization and the higher level of financial marketization,according to the financial marketization index.Finally,in order to ensure the stability of the model,we adopt the method of Heckman test to control the self selection problem,replace the measurement variables of investment expenditure with inventory investment,and transform the foreign ownership into virtual variables.Taking 2855 groups of observations of 571 private listed companies from 2014 to 2018 as sample data,the following results are obtained after regression of heterogeneity stochastic frontier model with maximum likelihood method.First,at present,private listed companies in China are still facing serious financing constraints.Private listed companies generally can not reach the optimal level of investment.Second,foreign ownership can help private listed companies in China to alleviate the financing constraints they are facing.At the same time,the larger the proportion of shares,the stronger the role of easing the financing constraints.Third,for private enterprises in provinces with low financial marketization level,the effect of foreign ownership to alleviate the financing constraints is limited.However,for the private listed companies in provinces with higher financial marketization level,foreign ownership can more effectively alleviate the financing constraints they are facing.The improvement of financial marketization level can promote the easing effect of foreign ownership on financing constraints of private listed companies.On the whole,it is the general trend for China to continue to expand its opening-up and foreign investors to invest more in Chinese enterprises.To a certain extent,highquality foreign investors can help private enterprises in China to reduce the information asymmetry inside and outside enterprises,alleviate the agency problem of enterprises and transmit good corporate signals so as to ease the financing constraints.To a certain extent,the improvement of financial marketization level can also promote this mitigation effect.Finally,based on the perspective of this study,this paper puts forward the following suggestions on how to reduce the financing constraints faced by private enterprises to investors,private enterprises and financial marketization: first,orderly promote the pace of opening up,promote the quality construction of domestic and foreign investors;second,create a good business environment,moderately increase the support of private enterprises;third,continue to promote various institutional systems We will continue to reform and improve the level of financial marketization.