Case Study on Leveraged Financing Structure and Excessive Investment Activities in Domestic Listed Companies

In the circumstances of market economy, it seems fair to claim that debt is not just a financing instrument, but more importantly, an administrative instrument. Through the application of regression analysis, and taking all the A-stock listed companies on China´s stock market during 2001 to 2006, it can be concluded that excessive investment activities exist in China´ s listed companies, and leveraged financing generally fails to demonstrate any restraining effect on excessive investment activities in such companies; it can be discovered through a further analysis in connection with the nature of ultimate control in such companies, that leveraged financing fails to demonstrate any restraining effect on excessive investment activities in state-holding companies, and it even aggravates excessive investment activities in the companies per contra, while leveraged financing does demonstrate a restraining effect on excessive investment activities in non-state-holding companies.