Bank debt, growth opportunities and corporate investment behavior: Empirical evidence from Chinese listed companies

Abstract

As one of the two major creditors of corporate debt in China, the bank has great advantages in monitoring corporate's behavior than commercial credit creditors. So, this paper proposes that the "control effect" of the liabilities mainly comes from bank debt. To verify the above assumption, we use the data of listed firms during 2008-2010 to examine the bank debt-investment relationship. The result shows that bank debt has a negative effect on corporate investment behavior. In addition, we find the growth opportunities do have an impact to the relationship between bank debt and investment: The debt-investment relationship is significantly negative in high-growth firms, but not significant in low-growth firms. © Springer-Verlag Berlin Heidelberg 2013.