The Research On Factors Of Changing Investment Direction Of Raised Funds And Its Impact On Company Performance

Based on the Principal-agent theory and Information Asymmetry theory,this paper explains reasons and impacts towards the changes of investment direction of raised funds.Firstly,literature review of the impact of changes in the use of raised funds are illustrated.Then the status quo of alternation of financing capital usage is depicted in the second part.At the same time,this paper establishes a theoretical hypothesis on the influencing factors of raised fund changing and its impact on the company performance,Finally,the paper establishes a measurement model based on the panel data of Chinese listed companies from 2005 to 2018.The empirical results validate our previous assumptions.The results find that companies with high ownership concentration,small scale are more likely to change the use of raised funds.Besides,local government’s policy and economic conditions also affect companies’ choice.Moreover,it found that the changes of raised fund usage will often lead to the deterioration of the company’s short-term and long-term performance,and also found negative effects on short-term performance are greater than the impact on long-term performance,the negative impact on private enterprises is greater than the impact on state-owned enterprises.Finally,the paper illustrates five cases that indirectly demonstrate the relationship between changes of raised fund usage and the performance of the companies.The results of this paper clarify the relationship between the use of funds raised by listed companies and their corporate performance,and provide some references and suggestions for the improvement of China’s capital market system,in order to improve the efficiency of the use of funds raised by listed companies in China,and regulate the use of funds raised by listed companies.The innovations of this paper mainly include the following points:(1)The paper conducts an empirical analysis of the two main reasons for the change of the investment direction of the raised funds,which are the main business change and the supplementary liquidity.It is believed that the change of the investment direction of the raised funds for the purpose of supplementary liquidity should give more attention.(2)In the research on the impact of the use of raised funds on performance,the short-term impact and long-term impact,and the classification research of state-owned enterprises and private enterprises were carried out.The results show that the change in the use of funds raised by listed companies will have a negative impact on the company’s short-term and long-term performance,and the impact on private enterprises is greater than the impact on state-owned enterprises,which has certain reference significance for the regulatory authorities to formulate relevant policies.(3)This paper also combines case analysis to indirectly show the relationship between the change in the direction of fundraising of listed companies and company performance in China.