Impacts of the Debt Financing on Firms' Investment Behavior Evidence from the Chinese Listed Manufacturers

Debt financing will bring different effects to enterprise's investment decisions. This article studies the impacts of different debt financing level and debt maturity structure on corporation's investment behavior, based on the data from 784 listed Chinese manufacturing companies. Research shows that these companies prefer short-term liabilities. Debt level is in significant negative correlation with corporation's investment, which tends to be much more obvious in those corporations with high-growth expectation. Effect of over debt financing leading to insufficient investment is hereby verified. In our study, no evidence is discovered to support the positive relationship between debt maturity structure and corporation investments, neither in full-sample testing nor group testing. It suggests that Chinese listed manufacturing companies did not use debt maturity instruments consciously.