Paper Title:
Debt Financing, Corporate Governance and Overinvestment
  Abstract

This paper examines the impact of debt financing on overinvestment in Chinese listed companies. Using an accounting-based framework to measure over-investment and free cash flow, we find evidence that, debt financing can’t mitigate overinvestment in Chinese listed manufacturing companies. Further tests examine whether firm’s governance structures are associated with overinvestment. The evidence suggests that governance factors also can’t mitigate over-investment in China. Reasons lie that hard constraint of debt financing doesn’t play its role in China. There also exists assets maturity and debt maturity mismatching problems in Chinese manufacturing listed companies.

  Info
Periodical
Advanced Materials Research (Volumes 219-220)
Edited by
Helen Zhang, Gang Shen and David Jin
Pages
1081-1084
DOI
10.4028/www.scientific.net/AMR.219-220.1081
Citation
L. Zhu, B. Tang, "Debt Financing, Corporate Governance and Overinvestment", Advanced Materials Research, Vols. 219-220, pp. 1081-1084, 2011
Online since
March 2011
Authors
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Price
$32.00
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