The Relationship Of Debt Maturity And Investment Of China's Listed Companies

How the debt level and the debt maturity impact on corporation's investment decisions, it is an important question of modern corporate finance. In a Modigliani and Miller world with perfect markets, a corporation's financial policy-including the maturity of its debt-has no bearing on its investment decisions. However, in a world with imperfect markets, a corporation's financial policy-including the maturity of the debt-may have a significant effect on its investment. Because of the conflict between shareholders, debtholders, and managers, the level of the debt and its maturity structure give rise to underinvestment or overinvestment incentives. The debt maturity structure is the important content of a debt contract. Moreover the governance effectiveness of long or short term debt is different. In general, short term debt may reduce the asymmetrical degree of information, transmit the signal of company's growth opportunity, and reduce the incentive of insufficient investment and so on. And the long-term debt may prevent the manager's inefficient expansion. Therefore, many western literatures indicated that the firms may shorten debt maturity to twist the conflicts of shareholders/creditors or shareholders/managers. The paper has mainly analyzed the relations of debt maturity and investment and the mutual influence, as well as China's listed companies whether and how to govern corporate investment by shortening debt maturity. Paper's prime task is as follow:First, this paper has outlined the background of the theory and its practical significance, and then summaried the research tendency about debt maturity and investment. Then it analyzes the present situation of debt maturity and investment in China's listed companies. We utilize many kinds of statistical methods to analyze the debt maturity structure, such as main body and industry characteristic of China's listed companies. And then, establish the regression model of debt maturity and investment, and do the regression by utilizing the data of China's listed companies. Finally, to elimilate the impaction of industry, take the example of the manufacturing industry do the regression. And divide the data into several groups, according to the index of debt level, growth opportunity and project risk. Use the group data to analyze the relationship of debt maturity and investment, and the government effectiveness of long and short term debt.