The Research on the Corporate Governance Effect of Debt Financing in Chinese Listed Companies Based on Structural Equation Modeling Approach
|School||Nanjing University of Finance and Economics|
|Keywords||Financing Behavior Financing Structure Capital Structure Debt Financing Governance Structural Equation Model|
Research on Debt Financing Governance began in the 1970s abroad, Jensen (1986) first proposed the discretionary governance of debt, indicating that the purpose of debt financing governance are to protect the interests of investors and achieve efficient management. Good debt governance plays a significant role on the competitiveness of enterprises and the potential advantages of listed companies. In foreign countries, research on the effect of debt governance has been relatively mature, but the corresponding research in China was originated from the late 1990s, only a decade to the current, both the theoretical and the empirical research are extremely immature. Because of the defects in Chinese financial institutional environment, the role of debt financing on corporate governance did not receive due attention, so the research on debt financing governance has important significance.In the respect of theoretical research on debt financing governance, this paper references to some mature domestic and foreign theories, including the Agency Cost Theory, Signal Incentive Model, Pecking Order Theory of Financing and the Control Theory, etc. Through elaborating on these theories, this paper dedicates to extract the specific effects of corporate governance effects of debt financing, reflecting the Effect of Agency Costs, the Effect of Governance Performance and the Effect of Control. This is the cornerstone of empirical research in this paper.The empirical research in this paper takes into account the market mechanisms and the degree of market maturity are different from West, some effects of debt financing governance extracted from the Western theories cannot directly reflect the features and the governance characteristics of the Chinese company, so these empirical results from abroad cannot be used directly to explain Chinese listed companies. On the basis of reviewing the empirical results of abroad, this paper studies the 897 non-financial companies which were listed in Shenzhen and Shanghai Stock Exchange from 2001 to 2007. These listed companies are divided into 614 state-owned enterprises and 213 non-state-owned enterprises, in the perspective of the institutional background of Chinese listed companies, the author proposes the hypothesis on the debt financing governance of Chinese listed companies and uses SEM method to research how corporate features and governance characteristics affect the effect of debt financing governance of Chinese listed companies respectively. The conclusion of empirical research of this paper indicates: Solvency, debt maturity, debt levels and firm characteristics have an impact on the performance of debt financing governance. Among them, debt levels are negatively correlated with the governance performance which is deviate from the assumptions. This can be explained by the special institutional background of China. From the perspective of solvency and debt maturity, the current comprehensive debt financing governance of listed companies has not produced the due promoting effect to the performance of enterprises. Besides, the characteristics of debt financing governance of state-owned enterprises have a larger effect on performance than non-state enterprises.Finally, the author proposes the policy recommendations to improve the debt financing governance on the basis of the empirical results.