Empirical Research On The Inefficient Investment Behavior Arising From The Conflicts Between Stockholder And Creditor

In the financial management of enterprises, the investment decision-making, as the main driver for the company's growth and the important foundation of the future cash flow, is the starting point for the company's financial strategy. Under normal situation, enterprises will invest the project whose net present value is above zero on the goal of maximizing enterprise value, thereby, will abandon the project whose NPV is below zero. Foreign literature research shows that, because of the conflict of interest existing between shareholders and creditors, the enterprises, in order to pursue maximum of the share, is more likely to abandon the project whose cash flow is stable and positive in NPV, and to invest a project whose cash flow is fluctuant and negative in NPV, thereby creating inefficient investment (under-investment or over-investment), damaging the overall interests of the creditors and the enterprises.At first, this paper has sorted the theoretical and empirical research both at home and abroad, and made further theoretical analysis comprehensively and systematically on inefficient investment behavior arising from the conflict of interest between shareholders and creditors from two angles---the internal driving force and the external conditions, on which this article puts forward the analysis hypothesis. To verify the hypothesis, this paper establishes the multiple regression model based on the controlling variables such as the short-term liabilities ratio, cash flow ratio, the recent investment opportunities and long-term investment opportunities, by which to study the inter-relationship between long-term debt ratio and the investment expenditures. Then, taking the data of 478 manufacturing industries in China during 2000 and 2006 as samples, this paper empirically tested on its theoretical analysis, and the empirical results is matched with the research hypothesis: In Chinese manufacturing companies, conflict between shareholders and creditors leads to both over-investment and under-investment; In high-risk-project companies, conflict between shareholders and creditors mainly leads to over-investment, and in low-risk-project companies, it mainly leads to under-investment; It mainly leads to over-investment in low-growth enterprises, but under-investment in high-growth enterprises; In those enterprises with high risk of bankruptcy, the conflict of interest between shareholders and creditors causes both over-investment and under-investment more seriously. Finally, some relevant recommendations on how to reduce inefficient investment behavior arising from the conflict between the shareholders and bondholders have been proposed.