The Impact Of Bond Covenants Protection Degree On Enterprise Investment Efficiency

The 14 th Five-Year Plan requires the bond market in China’s financing market to improve the market-oriented bond issuance mechanism,steadily expand the scale of the bond market,and enrich the variety of bonds.Bond financing has the advantages of low financing cost,protection of shareholders’ control rights and high flexibility,so the scale of bonds issued by Chinese enterprises has been increasing in recent years.However,compared with countries with well-developed bond markets,China’s corporate bond market started late and developed slowly.Nowadays,the rigid redemption of corporate bonds in our country has been gradually not be complied with and the marketization process has been gradually promoted,which also puts forward higher requirements for the professionalism of bond issuers and bond investors.As an important part of the bond prospectus,the bond covenants are an endogenous means to control the agency problem between the bond issuer and the bondholder.They can restrict the management’s behavior in advance and stipulate the responsibilities after the credit default to protect the rights and interests of the bondholder.However,the theoretical analysis and practical application of the bond covenants in our country are relatively inadequate at present.It is necessary to further analyses the nature and function of the bond covenants.As the two main research contents of corporate finance,investment and financing of enterprises are related to each other.In addition,under the background of the new normal of economy,further improving the investment efficiency is of great significance for the further development of enterprises.Therefore,this paper takes the listed companies which issued corporate bonds as the sample to analyze how the bond contracts will affect corporate investment efficiency and provide new ideas for the research on the relationship between investment and financing.Based on the research objectives,this paper uses the corporate bond issued from2007 to 2020 as the sample,combined with agency theory and debt contract theory,and uses the empirical research method to test the impact of bond covenants protection index on the degree of inefficient investment of enterprises.On this basis,the research framework is set up by analyzing the information asymmetry theory,and the moderating effect analysis is carried out.Four variables that affect the quality of enterprise information disclosure are selected: leading underwriter’s qualification,analysts’ attention,accounting conservatism and economic policy uncertainty.Inspired by the relationship between investment and financing,this paper use the degree of financing constraints and the degree of short-term capital dependence as the intermediary indicators,and analyzes the impact paths of bond covenants on the investment efficiency of enterprises.Finally,the robustness is tested by replacing the explanatory variables,adding missing variables and Heckman two-stage method.The conclusions are as follows:(1)The bond contract term protection index can significantly reduce the degree of inefficient investment.(2)The degree of financing constraint and the degree of short-term capital dependence are significantly increased by the increase of bond covenants,and can significantly reduce the degree of inefficient investment of enterprises,and these two mediating effect variables are affected differently by different types of contract terms.(3)For the samples with higher uncertainty of economic environment,better qualification of lead underwriter,higher attention from analysts and higher accounting conservatism,the impact of bond covenants protection index on the degree of inefficient investment of enterprises is more significant.(4)The robustness of the main regression results is confirmed by changing the measurement method of explanatory variables,adding missing variables,controlling individual effects and Heckman two-stage test method.The innovations of this paper are as follows:(1)Examining various regulatory effects to test variables.The moderating effect is analyzed from the perspective of information asymmetry,and previous studies on investment efficiency have paid more attention to internal factors,while this study has considered more external factors in the adjustment effect analysis;(2)From the perspective of financing,this paper analyzes the intermediary effect,which increases the marginal contribution to the research of corporate investment and financing relationship.