An Empirical Study Of The Infuence Of Financing Constraints On Operating Performance Based On Panel Threshold Model

According to MM theory, the cost of internal financing is equal to that of theexternal financing for a corporation in a perfect capital market. Moreover, acorporation can raise money from outside at any time, which results in theinvestment decision is completely independent of the financing decision, onlydepending on the investment opportunities the corporation faces with. However,the perfect capital market does not exist. In fact there are some issues likeasymmetrical information, the principal-agent and tax effect in the real world,which raise the cost of external financing for a corporation, expanding the costdifference between internal and external financing, and making everycorporation under different degree of financing constraints.Many literatures from home and abroad are collected and sorted for thispaper. The result shows that most of the researches are based on samples with alllisted companies and focused on the relationship between financing constraintsand investment. However, the characteristics of different industries are not thesame and the company operators care more about operating performance. Inview of this, the financial data from2001to2012of1494different Chinesecorporations are picked up as samples to analysis the effects of financingconstraints on the operating performance of a corporation. Some useful advice isput forward in order to reduce the financing constraints and improve operatingperformance of a company.Firstly, the binary Logit model is used for measuring the degrees offinancing constraints a corporation faced with by creating the financingconstraint index. The result shows that the financing constraint is significantpositively related to the current ratio and asset-liability ratio, significantnegatively related to the return on net asset and the financial redundancy.Secondly, depending on the widely used “cash-cash flow sensitive model”,the created FC index is applied to the empirical study of the correlations betweenfinancing constraints and the cash holdings behavior, in order to verify the effectiveness of the created financing constraint index. It shows that the“cash-cash flow sensitive” is significant for the company with high financialconstrains, but not for the company with low financial constrains. So the FCindex passes the examination of the “cash-cash flow sensitive” model. The resultshows the created financing constraints index reflects the degree of financingconstraints a corporation faced with quite well.Thirdly, in order to analysis the nonlinear relationship between thefinancing constraints and the operating performance of a corporation further, themodel of the panel date threshold model is created, and the growth opportunity isimported as the variable of threshold. The result shows that the financingconstrains are not conductive to the improvement of operating performance ofmanufacturing listed companies and a significant regime effect existed. Whenthere are not enough growth opportunities for a corporation, the influence is notsignificant, but with the increase of growth opportunities in a range and theeffect become significant. And when the growth opportunities increase more, theeffect is eased and significant.Finally, this paper is summarized and some corresponding policyrecommendations are put forward from the perspectives of both the enterpriseand the government in order to reduce the financing constraints and improveoperating performance of a company.