Research On The Effect Of Equity Refinancing On The Sensitivity Of Corporate Investment To The Cost Of Capital

Equity refinancing is an important way for corporate finance.In theory,the refinancing behavior should be the rational business behavior chosen by companies based on their own development needs.However,in our country,the refinancing of listed companies has always been under the government’s strict control,companies themselves can not decide on the financing methods and scale independently.This paper attempts to explore the interaction between the behaviors of regulator-led refinancing and capital investment,from the point of micro-enterprise resource allocation efficiency,this paper investigates the necessity and limitations of refinancing regulation,which enriching the research on equity refinancing and give advice to increase the pertinence and applicability of the regulation.Historically,since MM theory proves that the cost of capital is the cut-off point of the optimal investment decision under the assumption of no arbitrage,the scientific status of capital cost in investment decision-making has not been effectively promoted.The sensitivity of investment to the cost of capital means the cautious use of refinancing funds by companies.It is the basis of "investor protection" emphasized by refinancing regulation.Therefore,this article adheres to the constraint conception of the cost of capital proposed by MM theory,including the firms’ refinancing behavior into the constrained model of the cost of capital and investment,and empirically examines the changes of rational capital investment before and after refinancing,moreover,explores the loss of investment efficiency based on the economic and statistical characteristics of the sample path.Taking the listed companies which took refinance in the period from 2010 to 2014 as a sample,the study finds that the sensitivity of investment to the cost of capital is negative on the whole,the investment decision is significantly constrained by the cost of capital,which is in line with the rational rule in MM investment theory.After excluding the multiple financing sample and controlling the time and industry effect,this sensitivity is significantly reduced by the refinancing event.Further study shows that the internal refinancing needs of the firms and the investment orientation are important factors.The actual demand for refinancing can effectively ease the damage to this sensitivity,and the subsequent change of funds raised has a heterogeneous effect on the sensitivity of investment to the cost of capital of the sample companies.Unlike previous studies,this article finds that not all changes in funding have resulted in poorer economic consequences.On the basis of empirical evidence,this paper believes that the current refinancing supervision ignores the in-depth examination of the actual financing needs of companies,and that the access system consisting based on profitability and dividend indicators is not sufficient to screen for truly meritorious enterprises,nor is it sufficient to play an important role in the allocation of resources in the capital market.Only pay attention to the company’s true financing intentions and actual operating conditions to determine the qualification of refinancing,can the rules effectively guard against regulatory arbitrage and paradox.At the same time,the current refinancing rules still lack strict restrictions on the use of funds raised and follow-ups.Distortions such as the financialization is separating the dependence relationship between the capital market and the real economy,and the arbitrarily changing of the fund-raising direction really harms the economic efficiency of the entity and undermine the value recycling mechanism between investment and financing parties.In this regard,the setting of the access threshold for refinancing policies still needs to be perfected,strict entry but loose out is the very defect.The research conclusions of this paper provide practical enlightenment and empirical basis for optimizing refinancing supervision and perfecting the autonomy mechanism of corporate investment decision-making.