Research On The Relationship Between Financing Constraints,Risk And Asset Pricing

Financial constraints,which is caused by Principal-agent problem,information asymmetry and so on,has become an important factor affecting the producting and operating of enterprises as well as investment choices, and it is also one of the main risks faced by enterprises in the process of production and operation.In this case, the external cost of capital is higher than the cost of internal capital.Therefore, the enterprises,faced with different financing constraints, would have different performance in the capital market.For an effective market mechanism, this risk should be found in the market price,in other words, the risk of financing constraints will have a significant impact on the capital market pricing.In this paper,we gradually study and discuss along the route of "financing constraints-risk-Asset Pricing".Firstly, we discuss the financing constraints of enterprises, including the theory of corporate financing constraints and the measurement methods of financing constraints.We establish two kinds of financing constraint index on the basis of structure model and dichotomise separation model.as a measure of the degree of financing constraints.Secondly, we discusses the relationship between the degree of financing constraints and the risk of enterprises,using the classical CAPM model to measure the system risk of individual by beta coefficient.The result shows that constrained firms are at greater risk, suggesting the existence of financing constraints.we also find constrained firms have a higher capital return rate.On this basis, we further explore whether the financing constraints risk has been included in the traditional asset pricing models.At present, many scholars have adopted this method, introducing the financing constraints factors into Fama-French 3-factor model as an independent factor.But in F-F model, the market value factor reflects the relationship between the scale effect and the stock return rate,however, lots of articles have demonstrated the high degree of correlation between financing constraints and firm scale.Therefore, we make the further improvement, grouping the firms according to the scale, each inspects and compares with the entire sample.we discuss each group respectively,and make comparison with the full sample.we find that,in the full sample, financing constraints factor does not have significant, and with the scale changing from large to small, financing constraint factor significant increases gradually. This shows that for small scale enterprises, financing constraints can explain the equity interest rates well,implying financing constraints should be considered to participate in asset pricing process as an independent factor.Another improvement of this paper is that,we pay attention to the relationship between the characteristics of the company’s quality information (this article specifically refers to the financial infonnation) and pricing efficiency.We examine the firms according to the extent of the company’s infonnation contained in the quality information.The results show that the higher the company’s characteristic information contented, the higher significant the financing constraint factor have. Therefore, this paper concludes that for the small scale, high quality characteristic infonnation contented firms, financing constraints have stronger explanatory power,suitable to participate in asset pricing as an independent factor.