Financial Ecological Environment, Directors' Network And The Governance Effect Of Debt Financing

Corporate governance is a common problem faced by market economies in recent years. Enron, WorldCom and other corporate scandals and Chinese listed companies frequently damage Equity incident exposed a major flaw in the corporate governance model.Corporate governance issues become the focus of the center. Company as a micro-economic entity, just like the cell of a country's economic system, the normal development of the company will promote the healthy operation of the national economy.Since the reform and opening up the economy in China, the nation has got a healthy and rapidlydevelopment,and we have accumulated some experience of corporate governance.Currently, corporate governance can be summarized as six kinds of mechanisms: Board of Directors Governance, management control, market for corporate control, and supervision of financial institutions concentrated stock, debt financing and product market competition.Among them, the debt financing has become more mature governance tool.Debt financing and equity financing are the two main tools of modern corporate external financing. According to Western pecking order theory, debt financing due to the low cost of capital advantage, it has become the first choice of refinancing. In recent years,macro economy in China trends showing deflation. Relevant statistics show that the proportion of debt financing in the capital structure of Chinese listed companies reaches 50%or more. The company continued to expand the size of the debt, but the effect of debt financing is very limited. Above on Chinese listed companies,Scholars' research shows that the corporate governance of debt financing is in the suppressed state, and do not play the positive governance role.Board governance as the core of the company's internal governance, has got more and more people's attention. Many scholars have put it forward in the modern corporate governance, that the establishment of the balanced mechanism among shareholders, board of directors, board of supervisors and operating management is very imporant. Because the directors are not only the agent of shareholders, but also the client of management, they have three kinds of responsibilities: authorize, decision-making and supervising, and plays an important role in the convergence of corporate governance. The effects of board governance will directly affect the interests of shareholders and corporate performance.However, directors' effect has not been included in the existed researches of debt financing governance, the interactive governance effect of the Board and debt financing was ignored.The phenomenon of sharing directors among listed companies is very common, these directors also known as interlocking directorates. The exist of interlocking directors help establish a link relationship between listed companies,the linkage we also called directors'network. In the overall network of directors, each director member's behavior will has influence on other directors, each director has different influences and the impact on corporate governance are also different, that due to the difference of social resources which they possessed. Why debt financing cannot promote the corporate governance in Chinese listed companies? Does it relevant to the neglect of the role of directors? To answer these questions, this article analyse debt financing governance of Chinese listed companies conducted in-depth research from the perspective of the network of Directors. In addition,the company's development is inseparable from the support of the social environment,as an external corporate governance mechanism, financial ecological environment has fundamental impact on the debt financing and the Board of Directors, so at the end of the study in the context, we will base on the financial ecological environment, and then do researches of issues talking above.Structural arrangements and the main contents are as follows:The first chapter is introduction. This part introduces the research background and proposes scientific questions, general description of the research significance, research methods, research framework and the main innovations.The second chapter is literature review. In the corporate governance research as the main line, this part summarizes the domestic and abroad researches on corporate governance from three aspects: the debt financing, the Board of Directors and the financial ecological environment respectively. This chapter presents research starting point of this paper, and provises adequate evidence for the following research.Chapter three is theoretical analysis and the hypotheses. This chapter demonstrates the relationship among debt financing, directors' network and corporate governance, and build up the framework of following studies. In the capital structure theory, agency theory,control theory and the theory of incentives under the support, this part discusses the impact of debt financing on corporate governance; using sociological analysis and combining with social network theory,demonstrate the effects of Directors' network on the debt financing governance. In the end, it proves the impact of financial ecological environment on the directors' network,debt financing and the corporate governance theoretically.The fourth chapter analyzes the status quo of debt financing and performance of Chinese listed companies. The use of statistical data analysis financing situation of listed companies, combined with the performance of the listed companies, the results give a clear status and role of debt financing in the companies' finance tools, and pave the way for the empirical analysis.Chapter five analyzes the debt financing governance effect of listed companies. Using Chinese A-share listed companies' data,and constructing a mathematical model to demonstrate the first hypotheses, to verify inverted U-shaped impact characteristics of debt financing on corporate governance.Chapter six is the impact of debt financing on the directors' network governance effect.First, this chapter combined with social network theory to define the directors' network, and build relevant indicators to estimate directors' social network characteristics. Then, to test the hypothesis two and hypothesis three, we construct empirical analysis model and combine with data to analyze the relationship between the directors' network and debt financing governance effects. The results show that the director has occupied center stage director of the network, governance effects of debt financing can bring the better; and directors who own bank backgrounds have stronger effects on debt financing governance.Chapter seven analyzes the effect of directors' network on the debt financing governance under the influence of different financial ecological environments. This part uses data to estimate hypotheses four and hypotheses five empirically, in other words, the study is under the different financial ecological environments, and the purpose is to find whether the governance effects of debt financing of directors' network will display different characteristics at two kinds of environments. The results show that the region has better financial ecological environment, directors' position in network has stronger effect on debt financing governance; besides, governance effects of debt financing perfrom better by directors who have banking background.Chapter eight is conclusions and future prospects. This chapter analyzes the foregoing comprehensively, and summurizes the relationship among directors' network, debt financing and corporate governance systematically, and put forward the corresponding policy recommendations and future research plans. Firstly, listed companies should pay attention to proposed debt financing instruments of governance, and establish a dynamic adjustment of debt structure to facilitate timely financing strategies when it has reached the optimal amount of debt financing. Second, the companies should establish a sound mechanism for the selection of directors, which with different backgrounds can strengthen the effectiveness of board management about debt financing. The last stratege is to improve financial ecological environment constructions,which requires not only the governments'efforts, but also the industry's efforts to develop more of their own health needs of the companies. Listed companies as the main parts in the micro economic environment, they will be affected by the main financial ecological environment,at the meanwhile,companies'developments will also affect the financial ecological environment. The companies and the financial ecological environment are co-exist during the interaction between them. Build a perfect corporate governance mechanism is the core of construsting internal financial ecological environment.