Abstract
This thesis examines the impact of leverage, liquidity, and financial constraintson corporate investment. First, using data from listed companies in China, I
found that the impact of leverage on investment is first positive and then
negative as the leverage level goes from low to high. This result is consistent
with the tax shield effect when the leverage level is low, and the debt overhang
hypothesis when the leverage level is high.
Second, the main reason why liquidity promotes corporate investment is
because companies suffer from under investment. Through research, it is found
that changes in agency problems will lead to changes in the sensitivity of
investment to cash flow. In addition, the influence of multiple large shareholders
on controlling shareholder will affect the severity of the agency problem. Using
the fact that Chinese listed companies generally have multiple large
shareholders' ownership structure, the empirical results are consistent with the
hypothesis of under investment.
Third, through the impact of exogenous positive cash flow, it is found that
financial constraints exist and limit corporate investment. China's business tax
to value-added tax reform has no direct relationship with corporate investment,
but it reduces corporate tax burdens and provides additional cash flow. By
studying the impact of reforms on investment, unexpected positive cash flow
shocks have a significant positive impact on investment.
Based on the above conclusions, financial constraints do exist and restrict investment.
Above results are insensitive to the measurement of different variables,
industry characteristics, and macroeconomic changes. Besides, empirical
research also addresses several types of endogeneity problems. Thus, the
above results are robust
| Date of Award | Sept 2021 |
|---|---|
| Original language | English |
| Awarding Institution |
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| Supervisor | Jun Wang (Supervisor), Hailin Liao (Supervisor) & Binqing Xiao (Supervisor) |