Financial Restatement and Investment Inefficiency—A Path Analysis Based on Financing Constraints

Based on agency theory and signaling theory, we take a sample of Shanghai A-share listed companies during the period 2011-2015 and use a path analysis to construct our research models. This paper first studies the influence of financial restatement on inefficient investment, and then investigates a latent variable, financing constraints, and studies the mediating effect of financing constraints in the relationship. The results show that for the over-invested companies, the degree of over-investment will be reduced after financial restatement, with financing constraints playing a partial mediating role. For the under-invested companies, the degree of under-investment will be more serious after the financial restatements, with financing constraints also playing a partial mediating role. This paper enriches the application of a mathematical method, path analysis, in social science, and reveals the mediating effects of financing constraints. This paper is meant to guide listed companies in strengthening their corporate governance, and improving their information disclosure quality