The Impact Of Financing Constraints On Enterprise Management And Development

With the development of research on capital structure theory and investment&financing decision theory, the degree of financial constraints on the management and development of company has become one of the hottest issues. In the imperfect and incomplete capital market, asymmetric information and principal-agent problem result in the difference between external financing cost and internal financing cost. According to the pecking order theory, a company willfirstly consider internal financing, then the bond financing, the last is the equity financing. The financial constraint degree that the company faces in the external market will force the company to take different investment decision to adapt to the cash flow condition, which will have different effect on the management and development of the company.This paper selects the China-list real estate companies between the years from2005to2010as sample. It uses a brand-new method to measure the financial constraints that the company faced. Firstly, we divide the sample into five groups, and then construct a5×7scoring matrix from seven dimensions. Based on this method, our study is able to calculate each sample point’s financial constraint score. The score is negatively correlated with the financial constraint that the company faced. Comparing the financial constraint score with the traditional segmenting variables, the empirical study confirms that the result of financial constraint scoring method and segmenting variable method are consistent.Using the financial constraint score as independent variable, we consider the effect on abnormal management of real estate companies. We adopt*ST as the symbol of the abnormal management. The time before this point is set to bethe normal business survival time, while after this point we assume that the normal business comes to an end and the management status is abnormal. Do the survival analysis with the time-dependent Cox model. The empirical result shows that the lower financial constraint score, the higher the transition probability, namely the company is more likely to be marked as special treatment by CSRC.Investigate the effect of financial constraint score toward company’s size growth and productivity growth. Take the total asset growth rate to measure the size growth of real estate companies. Result shows that the financial constraint is positive correlated with size growth. This paper applies the Malmquist index to measure the growth rate of total factor productivity (TFP). Take company’s revenue as the output variable, total asset as the capital input variable, and employment as the labor input variable. We calculate the TFP Malmquist index at each sample point using data envelopment analysis (DEA) between the years of2006-2010. Through the panel data model, we can get the result that the higher financial constraint score, the higher TFP growth rate.