Research On The Smoothing Effect Of Working Capital Management On Enterprise Investment Under Financing Constraints

The growth of the macro-level economy is inseparable from the creation of enterprise value at the micro level.For enterprises,the creation of value is inseparable from investment and financing.How to effectively allocate and utilize the funds that are integrated often determines the survival and future development of the companies.For manufacturing companies,physical investment,or fixed asset investment,is crucial in the entire business process.Since manufacturing companies mainly produce physical products,the stock of fixed assets determines their future production capacity and market competitiveness.Therefore,the research on corporate investment activities in this paper can provide some guidance for the investment of enterprises from the perspective of decision-making,and help us understand and predict the development of macro economy.Financing activities are closely related to the investment activities of enterprises,because financing activities directly affect the investment level of enterprises,and more and more become the decisive factor influencing corporate investment activities.In China's current economic environment,enterprises are more or less faced with financing difficulties,and working capital is not only a “indication” for measuring the short-term solvency of enterprises,but also able to smooth fixed asset investment in the face of adverse cash flow shocks,and promote the steady development of fixed investment because of its liquidity and reversibility.This paper will use working capital investment as the starting point of research,and use the annual financial reports from 2003 to 2016 of manufacturing enterprises under the China Securities Regulatory Commission industry as sample data source to study the smoothing effect of manufacturing enterprises' working capital on fixed investment,the degree of financing constraints and the impact of the economic cycle on the smoothing effect,and finally expand the research results,to explore which of the components of working capital are the decisive factors affecting the smoothing effect on fixed investment.This study uses the classic FHP Tobin Q investment model,and increases the working capital increment,working capital increment and financingconstraints cross terms and working capital increment and economic cycle cross terms and other variables.The study found that China's manufacturing companies faced financing constraints in both the working capital investment and the fixed capital investment,and the sensitivity of working capital to cash flow is higher than the sensitivity of fixed investment to cash flow.In the face of financing constraints,due to the fact that the adjusted cost of working capital investment is lower than that of fixed investment and the working capital is reversible,enterprises generally choose to adjust working capital investment to smooth the impact of the adverse of cash flow on fixed investment,so the working capital is more sensitive to changes in cash flow.At the same time,this study concludes that the stronger the financing constraints faced by enterprises,the more significant the smoothing effect of working capital,and the smoothing effect of working capital in the economic downturn is stronger than the conclusion of the economic upswing.Finally,the study concluded that the three factors which are accounts receivable,accounts payable and short-term borrowing have the greatest impact on the smoothing effect of working capital.In particular,accounts receivable and accounts payable,that is,trade credit,provided funds for a considerable number of enterprises and made up for the financial gap caused by banks' bank-limited loans,provided these enterprises with cash flow and promoted their fixed investment.Efficient investment decision-making is an important factor in the growth and development of a company.A stable source of funds is an important driving force behind corporate investment.A systematic analysis of the different reflections of working capital and capital investment on cash flows is conducive to in-depth discussion of operations.The multiple roles of capital management highlight the important role of working capital in the process of fixed capital investment.