The Research On The Corporate Governance Effect Of Debt Financing In Listed Companies

The choice of financing structure influences interest and behavior of related parties in a company directly, while corporate governance is set to solve the relationship of these parties. So financing structure is closely related with corporate governance. As debt financing is one of the important financing ways, lenders of the company become one important party correspondingly who influence the corporate governance. Presently, the research on the corporate governance effect of debt financing abroad has been mature and widespread, but in our country, as the market is not well developed, debt financing and its ratio in financing structure do not attract enough attention and perfect corporate governance structure can not be constructed. So we should carry out a research on the corporate governance effect of debt financing in listed companies in our country.The thesis makes a thorough theoretical and empirical study on the corporate governance effect of debt financing. To be concrete, firstly, on the basis of theories of financing structure and corporate governance, the corporate governance effect of debt financing is extracted. Then considering the reality of Chinese corporations, three hypotheses have been given by modifying the corporate governance effect of debt financing partly. By checking the hypothesis with the data from the listed companies, some conclusions have been drawn. The whole thesis consists of four chapters.Chapter One first introduces the background of the thesis, the reason why we study this theme, and the significance of this thesis, then the outline of this paper is introduced, at last, the literature concerning this theme is concluded and the innovative ideas of the thesis are analyzed.Chapter Two introduces the theoretical analysis of the corporate governance effect of debt financing. First, In the thesis financing structure and corporate governance are defined, and the relationship between financing structure and corporate governance are analyzed which says that the financing structure influences the rights arrangement in corporate governance, such as proprietorship, corporate control, management, and claim on residual profit, and then influences corporate governance. Since the debt financing is an important category of financing method, the concept of the corporate governance effect of debt financing is introduced. Then the theoretical foundations for these effects are given in the literature. They are Agency Cost Theory, Signal Incentive Theory, Pecking Order Theory and Power of Control Theory. In the end, By refining from these theories, the definite effects are illustrated from two aspects.Chapter Three gives analysis on the corporate governance effect of debt financing in listed companies in our country. Firstly, the financing situation of our listed company is described, especially that of the debt financing. Secondly, the factors that influence liability financing effect on corporate governance in our country's listed companies are analyzed, including the immature mechanism of bankruptcy, lack of stock incentive for management in our country, poor creditors'supervisory ability resulted from our country's special ownership structure and our country's underdeveloped enterprise bond market. Thirdly, econometrical analysis on this effect in our listed companies is carried out by using the data from the listed companies in our country. Some factors and assumptions are changed from the western model of these effects to make it more suitable for our country's reality. The tool of EVIEWS is used to process the data and analyze the econometrical result. It shows that the short-term debt has positive correlation with the proxy cost, which is not consistent with the western literature. And debt ratio has negative correlation with the corporate performance, which is not consistent with the signal effect. In high project risk firms, the asset substitute effect is obvious. There are many reasons for this phenomenon, which results from the special economic environment, especially the factors I mentioned in the beginning of this chapter.Chapter Four gives conclusion and makes suggestions. The suggestions include: developing the enterprise bond market, especially enriching the variety of enterprise bond, adopting the share incentive mechanism, and building up a good credit environment.