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The Research on the Relationship between Social Captial and Debt Financing Governance Effects

Author: XuYao
Tutor: ZuoLiZuo
School: Anhui University of Finance
Course: Accounting
Keywords: social capital debt financing corporate governance
CLC: F234.4
Type: Master's thesis
Year: 2012
Downloads: 49
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Abstract


The theory of capital structure is the one of most important theories of finance. During the recent fifty years, it has been formed several kinds of school of thoughts and theories since the theory of MM in1958. With the development of corporate governance, the study focus on capital structure has been transferred to the relationship of capital structure and corporate governance efficiency. Funds is the necessary basis for business operation, most of the firms borrow the money of others at a cost in form of debt. Debt is not only a form of financing, but also a way of corporate governance. In addition to the governance effect of financial leverage and tax shield according to traditional theory of capital structure, debt can also improve corporate performance and governance structure through some governance mechanisms. Debt as a contractual relationship can alleviate the agents and shareholders conflict, adjust various interests, reduce the agency costs, promote the maximization of utility, promote the improvement of corporate value. Foreign scholars make mature research on debt financing. Meantime, in our country, the academic has been put emphasis on the research on the relationship of ownership structure and corporate governance, but the research on debt governance is still less. Moreover, social capital, as the novel concept, has been paid attention to it in our country which focus on social relationships. The study on social capital and corporate performance also has been the research focus. Social capital makes inevitable impact on corporate behavior, debt financing governance mechanisms is different from abroad under the influence of social capital. So this paper attempts to integrate the social capital and debt governance and make studies on the relation of above two.Combining the specification research and empirical research,this thesis is divided into the following five parts. The first part is introduction. This part focus on the significance and background, makes research on the theories of debt governance and social capital, outline the content of this research, methods, frameworks and innovations, exploring the local and international research results related, then investigate the concept of debt financing governance effects and social capital. The debt financing governance effects is the effects that debt financing makes contribution to governance performance. The social capital is the social relations network which can get resources for the corporate.The second part is related theory. This part outline debt governance and social capital theories about our research. The debt governance theories includes the theories of agency cost, free cash flow, signal transmission, control authority and corporate governance. Social capital theories includes the theories of social resources, social structure and social relations.The third part is theoretical analysis. This part firstly introduce the China listed companies status of debt financing including the debt levels, external financing method, debt financing structure and the debt financing governance effects in china. Then analyze the specific mechanism of debt governance, including the governance effect of tax shield, financial leverage, incentive and restraint, free cash flow, signal transmission, control authority, and creditor governance mechanism. Then this thesis analyze the relationship of social capital and debt governance in theory, and makes the conclusion that social capital can help enterprises to obtain debt financing but make adverse effects on debt financing governanceThe forth part is the empirical research. This part put forward four hypotheses based on the preceding theoretical analysis, including social capital and ability of debt financing is positively correlated; social capital and short-term debt level is positively correlated; social capital and long-term debt level is positively correlated; compared with the high social capital firms, the debt financing governance effects of low social capital is better. Then this paper selects2007to2010Shanghai and Shenzhen listing real estate companies as a sample, building multiple regression model and related indicators system. The sample companies are grouped according to the level of social capital, then by using the method of descriptive statistics, correlation analysis, multiple regression analysis, this paper concludes as follows. Fist, the social capital is proportional to the debt level, when the social capital is higher, the company debt level is higher, too. This effect is significant in short-term debt, but less significant in long-term debt. Second, social capital makes negative impact on debt governance. With ROE as the performance on behalf of corporate governance, the governance effects of debt financing is better with low social capital. In converse, the governance effects of debt financing is poor with high social capital.The fifth part is the conclusions and policy recommendations. This part summarizes the conclusions of theoretical analysis and empirical analysis. The based on research conclusions, this paper puts forward some relevant policy recommendations to improve the corporate effect of debt financing and reduce the negative effect of social capital, including the correct use of social capital, bank involved in corporate governance, development of corporate bond market, and improving the bankruptcy mechanism.

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CLC: > Economic > Economic planning and management > Accounting > A variety of accounting and bookkeeping > Statement of Financial Accounting
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