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Research on Financing Constraints and Uncertainty to Business Investment

Author: WangYingZi
Tutor: ZhangYuMing
School: Shandong University
Course: Accounting
Keywords: Financing constraints Uncertainty Investment - cash flow sensitivity Over-investment
CLC: F275
Type: Master's thesis
Year: 2010
Downloads: 278
Quote: 0
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Abstract


Investment and cash flow sensitivity problem, is one of the hot issues of the modern Western financial theoretical research in the past 20 years. Generally, internal cash flow fluctuations will affect the scale of investment. There are two theories to explain: asymmetric information theory is that the existence of the business investment - cash flow sensitivity of motivation is caused due to internal and external possession of enterprise information on investment and cash flow sensitivity motivation, leading to lower financing costs firms prefer internal financing, resulting in a positive correlation between investment and cash flow; agency theory that agency problems between management and shareholders, corporate management in pursuit of self-interest and freedom of enterprise cash flow in some of the negative net present value of investment projects. This paper analyzes China's listed companies financing constraints and investment - cash flow sensitivity issues and uncertainty introduced on the basis of analysis of the impact of uncertainty on investment, and uncertainty in financing constraints and investment - - the impact of the cash flow sensitivity, to provide empirical data with reference to the investment decisions of the listed companies in China. In this paper, based on related research, the first analysis of the investment and cash flow sensitivity of the two theories, that asymmetric information theory and agency theory, and compare the similarities and differences of the two theories; then learn from the classical model, accelerated model, and Tobin's Q model of investment model based on empirical research model suitable for the actual situation of China's manufacturing industry listed company, to examine whether the listed companies of China's manufacturing industry investment and cash flow sensitivity, cross-examination of China's manufacturing industry listed companies insufficient investment or excessive investment, as well as uncertainty in different financing constraints inhibit business investment still further promote business investment. An empirical model using 1999-2008 data of China's manufacturing industry listed company investment - cash flow sensitivity empirical study on the uncertainty of the listed companies in China's manufacturing industry, which use slack variable and fixed than net asset value, cash flow and capital stock ratio, working capital and capital stock than the sales margin, dividend payout ratio, sales revenue growth, asset-liability ratio multiple discriminant analysis to determine the financing constraint index ZFC. First, the overall test of the relationship between China's manufacturing investment in listed companies with cash flow, uncertainty whether to strengthen or weaken the relationship between the two. Score to measure the degree of financing constraints and in accordance with the dividend payout ratio, asset-liability ratio and ZFC lighter group were classified as financing constraints, financing constraints moderate group, severe group financing constraints on three sets of data, a linear regression analysis, inspection of manufacturing industry listed companies in the relationship between financing constraints and investment - cash flow sensitivity of investment uncertainty. Through empirical research, we draw the following conclusions: (1) China's manufacturing industry listed company overall investment and cash flow was a positive correlation; (2) the widespread phenomenon of over-investment in China's listed companies, different financing constraints vary ; (3) in accordance with the dividend payout ratio divided, there is uncertainty on corporate investment negative correlation score divided in accordance with the asset-liability ratio and ZFC U-shaped relationship between uncertainty and business investment; (4) the uncertainty of financing constraints lighter enterprises over investment disincentive to play a catalytic role in the moderate and severe financing constraints enterprise investment.

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CLC: > Economic > Economic planning and management > Enterprise economy > Corporate Financial Management
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