The Effect Of Spare Debt Capacity On Corporate Investment Efficiency

With economic globalization is an irreversible process, the enterprise’s economic life exposed in the tide of global economic volatility all the time, and the uncertainty has become to be the situation all enterprises have to dealed with. The American subprime mortgage crisis and European debt crisis warn the theoretical and practical financial flexibility is the best weapon to cope with uncertainty. Only have enough financial adaptabilityp--the nature of financial flexibility--firms would survive from the crisis and even get better development. Financial flexibility is constituted by cash flexibility, debt flexibility and equity flexibility. While the equity market in China is not sound and the CSRC’s mandatory dividend rules was announced, the debt flexibility is more and more prominent in financial flexibility.Former involved studies of spare debt capacity, which was the most important debt flexibility, no matter domestic and abroad, were mainly in three aspects:first, they studyed the role of financial flexibility with the debt flexibility as the response index of the financial flexibility; Second, they researched the value of the spare debt capacity, or the relationship between the spare debt capacity and the corporate performance; Third, they explored the role of the source of the spare debt capacity-bank credit. Few literatures studied the relationship between the spare debt capacity and enterprise actual decisions. Investment decisions are the most important parts of the enterprise actual decisions. A lot of former researches considered cash holding as the main explanatory variable to investment decisions, but there are a lot of scholars thinked that the main purpose of the cash holding was to maintain liquidity.Taking advantage with the listed companies in China, this paper studies the influence of spare debt capacity on corporate investment efficiency. Existing domestic scholars, studying on investment efficiency, often considered the influence of Financial Constraints and the level of risk on corporate investment distortions.) This article also discusses the Financial Constraints and risk level to study the moderat effect.It is shown that spare debt capacity promotes the corporate investment efficiency as a certain role. However, for different types of enterprises or enterprises in different environment, the effect is not consistent. With tough Financial Constraints or the low level of risk, the remaining debt ability has an obvious effect to promote the efficiency of corporate investment, and in the opposite, with smooth Financial Constraints or high level of risk, the remaining debt ability to promote the efficiency of corporate investment effect is not obvious or even may have the opposite effect. This shows that enterprises need to adjust the level of its financial flexibility and the inherent structure according to the circumstance. At the same time, regression analysises suggested that there were obvious investment distortions of the Chinese state-owned enterprises, which reflected the apparent agency cost. So, it is necessary for relevant departments to generate the more reasonable and effective regulations.