An Study About Investment And Cash Flow Of Chinese Listed Companies

Positive investment-cash flow sensitivity has been a key topic of corporate finance. Since it has been proposed by Fazzari for the first time in 1988, many scholars have done important contribution to the problem, while promoting corporate governance, capital structure and other traditional theories related to the development and operation of research and practice in theory being widely appreciated.The reasons that induce this phenomenon can be categorized as financial constrains of asymmetric information and overinvestment with their free cash flow. However, different companies have different reasons of the different sensitivities of the investment-cash flow. This paper focuses on the theme of investment-cash flow Sensitivity of Chinese Listed Companies. On the basis of studying the theories and research findings about corporate investment home and abroad, this paper fist analyses Chinese capital market and the basic features of Chinese listed corporations, then chooses 1441 listed companies from 2006-2010 as samples, empirical Studies show that there are positive investment-cash flow sensitivities of Chinese Listed Companies and the inherent motivation causing the sensitivity of investment-cash flow is the information asymmetry to the different internal and external financing cost. And then, this paper analyses the effect of listed company’s external environment and micro-characters on the sensitivities of investment-cash flow. The empirical results show that according to the nature of the controlling shareholders in stake, the sample is divided into state ownership control companies and non-state controlled companies and study the effect of ownership on the sensitivity of investment-cash flow, the non-state-controlled listed companies have a stronger sensitivity of investment-cash flow. Then, examine financial market environment on the investment-cash flow sensitivities, the higher financial marketization level’s companies have the lower sensitivity of investment-cash flow. At last, according to the classification of capital structure, the sensitivity of investment-cash flow is not the same linear relationship spending on the debt ratio, which is showed the inverted U-shaped relationship.Based on the theory and empirical analysis and financial situation and the feature of Chinese listed companies, the paper provides some useful and practical guidance for business investment to discriminate the degree of financial cost and design of corporate governance structure and developing corporate debt market of our country.