Title :
An Empirical Analysis of Debt Financing on Firm Investment Behavior: Evidence from China
Author :
Jiming, Li ; Chengqin, Shi ; Zhaohua, Wang
Author_Institution :
City Coll., Bus. Sch., Zhejiang Univ., Hangzhou, China
Abstract :
This study examines the impacts of debt financing on the firms´ investment decisions by employing the method of the multiple linear regression on the data from 2006-2008 of 60 Chinese real estate listed companies. We obtain three major findings. First, there is a negative relation between debt financing and investment behavior in both firms with low-growth opportunities and high-growth opportunities and that this negative effect is significantly stronger for firms with low-growth opportunities than those with high-growth opportunities. Second, there is a positive relation between debt financing and investment behavior in firms with mid growth opportunities and operating performance. Third, for the state-owned holding companies, there is a positive relation between the scale of investment and debt financing; while a negative relation between investment and debt financing exists in non-state-owned holding companies. The results provide support to agency theories of corporate leverage, and especially the theory that leverage has a disciplining role for firms with low-growth opportunities.
Keywords :
financial management; investment; regression analysis; corporate leverage theory; debt financing analysis; firm investment behavior; high-growth opportunity firm; investment scale; low-growth opportunity firm; mid-growth opportunities; multiple linear regression; non-state-owned holding companies; Companies; Correlation; Educational institutions; Finance; Industries; Investments; debt financing; investment behavior; over-investment; underinvestment;
Conference_Titel :
Information Science and Management Engineering (ISME), 2010 International Conference of
Conference_Location :
Xi´an
Print_ISBN :
978-1-4244-7669-5
Electronic_ISBN :
978-1-4244-7670-1
DOI :
10.1109/ISME.2010.17