Debt Financing, Investment and Corporate Performance

By building simultaneous equations and using 333 Chinese manufacturing listed companies in the panel data from 2001 to 2007, the paper examines the relationship among debt financing, investment and corporate performance. The empirical results indicate that there exists a nonlinear inverse U shape relationship between capital structure and corporate performance, there also exists the same relationship between investment expenditure and corporate performance; corporate performance has a significantly negative influence on capital structure; nonshild has a negative influence on capital structure and debt financing has a significantly negative influence on investment.