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Financial Development, Budget Constraints and Enterprises Investment Efficiency
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TitleFinancial Development, Budget Constraints and Enterprises Investment Efficiency  
AuthorWang Dingxiang and Qing Yu  
OrganizationSchool of Economics and Management, Southwest University; School of Finance, Southwestern University of Finance and Economics; 
Key WordsFinancial development; Budget constraints; Financing constraints; Heterogeneity stochastic frontier model 
AbstractFrom the perspective of financing constraints, this paper analyzes the theoretical relationship between financial development and enterprise investment efficiency based on AK model, and then adopts heterogeneity stochastic frontier model and methods to test empirically the impact of financial development on enterprise investment efficiency under different budget constraints based on the data from Chinese A-share listed companies over period 2006-2012.Theoretical research shows that financial development can improve the investment efficiency by reducing financing constraints. But it has different effects on financing constraints and investment efficiency for companies with different budget constraints mechanism. Empirical research shows that: The improvement of financial development level can significantly ease the financing constraints of private enterprises with hard budget constraint, reduce investment reliance on internal cash flow, reduce the uncertainty of the follow-up debt financing, improve the investment efficiency, but can’t significantly ease the financing constraints and the subsequent financing uncertainty of state-owned enterprises. The optimization of financial structure can ease the debt financing constraints, reduce the uncertainty of follow-up debt financing, and improve the investment efficiency of the private enterprises. But it can’t significantly ease the financing constraints and instead enhance follow-up equity financing uncertainty of the state-owned enterprises. The debt and equity financing can ease the financing constraints, but it will significantly improve the follow-up financing uncertainty.  
Serial NumberWP973 
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