Research On The Anchoring Effect Of The Cost Of Capital In Chinese Enterprise Investment Decision

Investment actvity is an important prerequisite for the enterprises’ survival and development, is an indispensable condition for the enterprises to expand size and increase strength. This means that investment decision becomes the core problem of the enterprise’s financial decisions. Only scientific and rational investment decision can be able to guarantee the maximization of shareholder wealth. The cost of capital is rate of return requested by investors. It is the min rate of return that enterprise managers must achieve,and also is the basic goal of the enterprise’s financial management. Enterprise’s investment decision must be based on the cost of capital as a benchmark. Only in this way can guarantee the rationality of investment decision. Therefore, the cost of capital has an anchoring effect on enterprise investment decision.Research on enterprise investment decision is always the emphasis in the enterprise financial decision research. 1958, Modigliani and Miller from the basic nature of the cost of capital starting depth the role of the cost of capital for corporate financial policy formulation.Enterprise investment decision theory has also got further development, MM Investment Theory, Neoclassical Investment Theory, Q Theory by Tobin, Financing Constraints Theory and Principal-agent Theory, have deepened the understanding of the investment decision-making, and more or less fostered the allocation of corporate resources, effectively maximized the financial benefits of the shareholders,and improved the economic efficiency. In recent years, the study of enterprise investment decision at home and abroad is widely. But mostly focused on the research of the free cash flow hypothesis of proxy conflicts and hypothesis of financial constraints caused by market information asymmetry. However, few studies are following the MM theory, further anchoring effect in Investment capital cost study.Therefore, this systematic study of Chinese enterprises listed in the investment decision-making cost of capital anchoring effect,And proposed some reasonable suggestion on how to use the cost of capital for enterprise investment decision making as a enterprise investment benchmark "anchor",To better achieve financial maximize shareholder, to ensure healthy and sustainable development of the theory of protection.Contents of this paper include: literature review, theory carding, research on the anchoring effect of the cost of capital in enterprise investment decision and data analysis.First, we briefly introduces the research background and illuminates the significance,research contents, research ideas and innovation points of this paper.And then,We reviews and analyzes the theories and literature on anchoring effect, investment decision and the anchoring effect of the cost of capital in investment decision. This theories and literature provide a theoretical basis and ideas for the later. And we discusses the mechanism of the cost of capital has anchoring effect on investment decision. Based on this, we propose the assumptions.With the data of listed enterprises as samples, we examined whether the“anchoring effect” exists in investment decision. In this paper, the anchor is divided into dynamic anchor and static anchor.In the end, we summarizes the main conclusions of this paper, shortcomings and points the future research direction and content.Through theoretical analysis and empirical research, the paper draws the conclusion that the cost of capital has anchoring effect on enterprise investment decision. Investment decision more influenced by the dynamic anchor and the static anchoring effect is not significant. The innovations lie in:(1) This paper systematically reviews the methods of estimating the cost of capital and more scientific estimates the cost of equity capital and the cost of debt capital.(2) We put the anchoring effect into enterprise investment theory and explore whether the cost of capital has anchoring effect on investment decision.