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Abstract： The financial development and financing constraints both are important factors affecting corporation investment behavior. Efficient investment not only requires the firms to have long-term steady cash-flow to put into， but also needs a good circumstance of the financial market around the firms. This paper uses the method of the stochastic frontier analysis （SFA） to measure the investment efficiency of the listed companies in China， then empirically investigates the relationship between the financing constraints companies facing in different regions and their investment efficiency. In the results， this paper finds that the level of investment can be promoted by the development of finance， also， the alleviation of the financing constraints influences positively on investment efficiency. Because of the various levels of the financial development in different regions， the listed companies’ investment efficiency differs greatly. In this paper， the conclusion enriches the study about the mechanism of how the internal and external environment influence the listed companies’ investment efficiency， and provides new evidence of boosting Chinese listed companies’ investment efficiency.
Key words：financial development， financing constraints， Investment efficiency
I. Introduction
More and more companies enter into market competition as the Chinese economy is booming at a high speed. An increasing number of researches on corporate investment behavior show that the investment behaviors of Listed Companies in China are often over-investment or under-investment.
Some researchers find that the company's cash flow is an important variable affecting the financing constraints and comes out with innovation decisions based on cash flow. Also， they conducted empirical analysis of the influence of financial development and financing constraints on the investment efficiency of enterprises on the basis of constructing the index of financial development index and the development index of financial intermediaries.
Thus this paper discusses the relationship between financial development， financing constraints and corporate investment efficiency.
II. Research Design
（i） Selection of investment efficiency measure method
This paper refers to the research method in Ran， selects beyond the log Douglas production function， followed by Battese. The model is as follows：
As for output indicators， we choose the main business profit index. For input indicators， this paper chooses the sum of fixed assets， long-term investment and the construction of the project as a measure of capital investment； Select the number of employees in the company as an indicator of labor input. （ii） Main method selection
This paper uses random frontier analysis （SFA） to measure 1172 listed companies’ investment efficiency from 2007 to 2013. The below refers to the method FHP model and Jiang’s. The model was constructed， and been empirical testified by Stata 12.0 software.
This paper will construct the financial development index based on Wang’s method. And we selected the annual report data of 1172 companies from 2007-2013 for a total of 7 years， with a total of 8204 sample observations.
（iii） Measurement result
From the empirical analysis of the correlation coefficient， the nature of the listed companies significantly affects the efficiency of investment in enterprises. For companies with under-investment， the development level of finance will provide more sources of funds， so that it has more capital to make reasonable investment and improve the investment efficiency. For over-investment companies， financial development will make the market structure and regulatory mechanism more transparent and strict， thus supervise this kind of company's investment behavior， and urge them to make more reasonable investment， and ultimately this improves the efficiency of investment. For companies with insufficient under-investment， little cash flow can restrict the investment of the optimal portfolio， which leads to the investment inefficiency. For companies with over-investment， too much cash flow will make it have more opportunities for inefficient investment， and ultimately leads to the decline in the efficiency of the company's investment.
Finally， this paper selects cash holdings（Cash） to replace cash flow（CF）， return on asset （ROA） to replace leverage（LEV） to carry out test. And the result shows that the model still stands after the change of the variables and carried out the robustness test.
III. Conclusion and policy implications
Research result shows that： （i） China's listed companies’ investment efficiency has been increasing year by year. But the overall efficiency is still in the middle and lower level， with a larger space for improvement. （ii） The non-state-owned enterprises are at a disadvantage of financing for a long time. They cannot achieve the optimal investment efficiency， but the improvement of the financial development level can significantly improve the investment efficiency of enterprises. （iii） The financial development level and financing constraints are not the same， this eventually leads to significant differences in investment efficiency. （iv） Asymmetric financing environment leads to the mismatch between corporate cash flow and investment efficiency. The lack of cash flow leads to inefficient investment efficiency and low investment efficiency at the same time.
Based on the actual situation in China， this paper puts forward the following suggestions： （i） Promote the improvement of the level of financial development to provide more investment and financing channels for listed companies； （ii） Reduce the local government intervention in banks and other institutions， improve the allocation efficiency of financial resources in the capital market； （iii） Launch more policies supporting small and medium enterprises， promote the development of them， improve the overall efficiency of investment， thereby promoting the steady increase in the level of macroeconomic.
Key words：financial development， financing constraints， Investment efficiency
I. Introduction
More and more companies enter into market competition as the Chinese economy is booming at a high speed. An increasing number of researches on corporate investment behavior show that the investment behaviors of Listed Companies in China are often over-investment or under-investment.
Some researchers find that the company's cash flow is an important variable affecting the financing constraints and comes out with innovation decisions based on cash flow. Also， they conducted empirical analysis of the influence of financial development and financing constraints on the investment efficiency of enterprises on the basis of constructing the index of financial development index and the development index of financial intermediaries.
Thus this paper discusses the relationship between financial development， financing constraints and corporate investment efficiency.
II. Research Design
（i） Selection of investment efficiency measure method
This paper refers to the research method in Ran， selects beyond the log Douglas production function， followed by Battese. The model is as follows：
As for output indicators， we choose the main business profit index. For input indicators， this paper chooses the sum of fixed assets， long-term investment and the construction of the project as a measure of capital investment； Select the number of employees in the company as an indicator of labor input. （ii） Main method selection
This paper uses random frontier analysis （SFA） to measure 1172 listed companies’ investment efficiency from 2007 to 2013. The below refers to the method FHP model and Jiang’s. The model was constructed， and been empirical testified by Stata 12.0 software.
This paper will construct the financial development index based on Wang’s method. And we selected the annual report data of 1172 companies from 2007-2013 for a total of 7 years， with a total of 8204 sample observations.
（iii） Measurement result
From the empirical analysis of the correlation coefficient， the nature of the listed companies significantly affects the efficiency of investment in enterprises. For companies with under-investment， the development level of finance will provide more sources of funds， so that it has more capital to make reasonable investment and improve the investment efficiency. For over-investment companies， financial development will make the market structure and regulatory mechanism more transparent and strict， thus supervise this kind of company's investment behavior， and urge them to make more reasonable investment， and ultimately this improves the efficiency of investment. For companies with insufficient under-investment， little cash flow can restrict the investment of the optimal portfolio， which leads to the investment inefficiency. For companies with over-investment， too much cash flow will make it have more opportunities for inefficient investment， and ultimately leads to the decline in the efficiency of the company's investment.
Finally， this paper selects cash holdings（Cash） to replace cash flow（CF）， return on asset （ROA） to replace leverage（LEV） to carry out test. And the result shows that the model still stands after the change of the variables and carried out the robustness test.
III. Conclusion and policy implications
Research result shows that： （i） China's listed companies’ investment efficiency has been increasing year by year. But the overall efficiency is still in the middle and lower level， with a larger space for improvement. （ii） The non-state-owned enterprises are at a disadvantage of financing for a long time. They cannot achieve the optimal investment efficiency， but the improvement of the financial development level can significantly improve the investment efficiency of enterprises. （iii） The financial development level and financing constraints are not the same， this eventually leads to significant differences in investment efficiency. （iv） Asymmetric financing environment leads to the mismatch between corporate cash flow and investment efficiency. The lack of cash flow leads to inefficient investment efficiency and low investment efficiency at the same time.
Based on the actual situation in China， this paper puts forward the following suggestions： （i） Promote the improvement of the level of financial development to provide more investment and financing channels for listed companies； （ii） Reduce the local government intervention in banks and other institutions， improve the allocation efficiency of financial resources in the capital market； （iii） Launch more policies supporting small and medium enterprises， promote the development of them， improve the overall efficiency of investment， thereby promoting the steady increase in the level of macroeconomic.