A model is constructed to analysis the corporate strategic expansion which influences financial contract in which the agent cost and moral hazard were included. The conclusion is that the earnings of lateral integration is positive relative to the ratio of debt ; but if the shareholder want to get more earnings from vertical integration , they must decrease the ratio of debt and increase the level of relationship2specific investment . Secondly , we discussed the principle2agent and moral hazard of financial contract , in which disclose that cash flow is important for corporate financing. The emperical evidences in this paper coincide with the above theoretical conclusion. At last , we give some advice about strategic expansion and financing decision.