Abstract: Efficiency of micro enterprise financing and investing is the key to the economic transformation, but the destructive growth of Chinese enterprises is a puzzle. IN view of the limitation of modern financing structure theory in explaining this phenomenon, this paper tries to start from perspective of institutional analysis, attempts to introduce the latest research results of the micro law and finance, constructs a theoretical framework from the lack of investor protection, to corporate investment and financing behavior distortion, to destructive growth finally, and gives empirical research based on literature review and related data of domestic listing corporation. The results show that there is a relatively obvious lack of investor protection in China, the resulting enterprise over investment and low investment efficiency resulted in the deviation of enterprise size expansion and efficiency improvement that is what is called destructive growth. On the basis of these, economic transformation also need to pay attention to the micro system correction, such as improving the investor protection mechanism, standardizing corporate investing and financing behaviors, which is conducive to the smooth transition of economic system.