How Does The Development Of Banking Industry Promote Manufacturing Efficiency Enhancement?

Exploring a feasible path for the growth of total factor productivity has always been a crucial issue that has been widely concerned and considered by all sectors of society.The report of the 19 th National Congress of the Communist Party of China stated that China has entered a stage of high-quality development.This is a pivotal stage for transforming our growth model and fostering new drivers of growth.To promote high-quality development,we need to start with improving total factor productivity.Under the current financial system in Chinese,which banks dominate the allocation of financial resources,banks are important sources of financing for the real economy.The support of bank credit affects the improvement of corporate productivity.From the realistic background,on the one hand,China’s efficiency measured by total factor productivity or labor productivity is still far from the frontier in the world,and this productivity gap exists not only at the national level,but also in the domestic level.This provides a huge space for improving the total factor productivity.On the other hand,the size of China’s banking industry has maintained a strong growth trend,and the banking industry’ s market-oriented reform,which aimed at encouraging the entry of the small and medium-sized banks,has brought changes in structure and competition of the banking industry.However,the development of China’s banking industry measured in these two dimensions has shown significant regional heterogeneity,which provides a more differentiated external environment for promoting corporate productivity.From the theoretical background,there have been studies that have explored the factors affecting the increase in total factor productivity from the internal and external levels of the company.What’s more,based on the perspective of financing constraints,the role of banking development in productivity improvement has also been analyzed.However,the fact that there exists heterogeneous productivity has been ignored,which leaves much room for the further research.Based on the realistic challenges and the theory gap,this thesis proposes the following key issues: Firstly,what are the typical characteristics of the development of banking industry and manufacturing industry productivity in China? Secondly,how can companies achieve productivity improvements in the context of heterogeneous productivity? Thirdly,what role does the development of the banking industry play in improving corporate productivity? Under the two different dimensions of the overall credit development of the banking industry and the development of small and medium-sized banks within the banking industry,are there any differences in the mechanisms between them?In order to explore the above-mentioned core research questions,this thesis mainly focuses on five aspects to discuss.Firstly,this thesis sorts out and integrates the theoretical foundations related to the development of the banking industry and the improvement of corporate productivity,so that we can better understand the mechanism of the development of the banking industry in the improvement of corporate productivity.Secondly,based on the review of China’s banking industry development and the efficiency improvement path of the manufacturing enterprises,this thesis analyzes the typical characteristics and dynamic changes of China’s banking industry development and manufacturing productivity.Thirdly,using data from Shanghai and Shenzhen A-share listed companies and the bank credit scale data of each city in China,a fixed effect model plus the instrumental variable method(FE-IV)is used to empirically investigate the impact of the overall expansion of the banking industry on corporate productivity.Fourthly,based on the background of China’s banking deregulation policy,this thesis first analyzes the specific implementation effects of this policy,and then introduces the institutional background of the small and medium-sized commercial banks’ scale expansion to examine its impact on corporate productivity.As China’s banking deregulation policy targeted at the entry of the small and medium commercial banks,its original intention was mainly to promote the development of small and medium-sized banks to better serve the development of local small and medium-sized enterprises(SMEs).However,there are significant differences in the sample of companies represented by the data of listed companies and the data of Chinese industrial enterprises.Therefore,in response to the issue of how the expansion of small and medium-sized banks affects the improvement of corporate productivity,this thesis provides different empirical evidence based on the level of listed companies and the level of Chinese industrial enterprises,in order to provide more substantial evidence for the policy effect assessment.Chapter 4 and 5 focus on this topic.Specifically speaking,using firm level data from the annual surveys conducted by the National Bureau of Statistics(NBS)in China,the regional level commercial bank branch data and U.S.four-digit manufacturing level data from the NBER-CES database,chapter 4 investigates the impact of the expansion of small and medium commercial banks on labor productivity growth and its specific mechanism from the perspective of the distance between enterprises and the world’s technological frontiers.Using data from Shanghai and Shenzhen A-share manufacturing listed companies and data from branches of commercial banks in cities,chapter 5 mainly examines the impact of the expansion of China’s small and medium-sized banks on the growth of total factor productivity of enterprises from the perspective of the domestic technological distance.Fifthly,the main research issues and conclusions of this thesis are summarized,and the related policy recommendations are provided based on the main research conclusions.At the same time,this thesis puts forward the possible deficiencies and the topics that can be further studied in the future.In addition to the introduction,the above five aspects are implemented from the first to sixth chapter of this thesis.By the analysis of the above sections,the main conclusions of this thesis are as follows: First,no matter whether it is a listed company or an industrial company that is not listed,there is a “catching-up growth” effect in the manufacturing industry in China for the latecomer companies to catch up with the technological frontier.Second,the impact of the banking industry development on the productivity growth of manufacturing enterprises is non-linear,and the effect depends on the firm’s distance to the technological frontier,regardless of the overall expansion of the bank credit or the scale expansion of small and medium-sized banks within the banking industry.That is to say,when the firm’s distance to the technology frontier is large,its productivity growth is positively promoted by the development of the banking industry;while when the firm’s distance to the technology frontier becomes small,the positive effect on the firm’s productivity growth may become weaker or even be inhibited.Third,from the perspective of the corporate ownership structure,the non-linear effects of the expansion of the overall bank credit on corporate productivity growth are more pronounced in state-owned enterprises(SOEs),while the non-linear effects of the expansion of small and medium-sized banks on corporate productivity growth are more reflected in the non-state-owned enterprises(NSOEs).Fourth,from the perspective of the institutional environment,the more mature the institutional environment of the city where the enterprise is located,the greater the non-linear effect of the expansion of the banking industry’s overall bank credit on the firm’s productivity.In contrast,the non-linear effects of the expansion of the small and medium-sized banks on the firms’ productivity are mainly reflected in areas where the institutional environment is less good.Fifth,compared to the labor-intensive industries,the non-linear effects of the overall expansion of the bank credit on corporate productivity growth are more pronounced in the capital-intensive and technology-intensive industries.Sixth,the smaller the scale of the enterprise is,the more the small and medium-sized banks’ scale expansion is conducive to improving the latecomers’ technological catch-up speed.Compared with the existing literature,the main contributions of this thesis are shown in the following four aspects.Firstly,this thesis re-explains the mechanism of the development of the banking industry on the improvement of corporate productivity from a new perspective of the firm’s distance to the technology frontier.This contributes to the expansion of the literature research on banking development and corporate productivity.In regard to the research perspective,the existing studies have analyzed the role of the banking industry development and the banking structure on corporate productivity based on the perspective of the matching of corporate capital demand and bank capital supply,but they have ignored the important role of the company’s technological status.Based on the novel perspective of the firms’ distance to technology frontier,this thesis explores the impact of the development of banking industry on the improvement of the enterprises’ productivity from the two aspects of the bank credit and the expansion of small and medium-sized banks,which is helpful for further understanding the specific mechanism from the perspective of matching corporate technological catch-up with bank characteristics.Secondly,this thesis takes the lead in constructing the firm’s distance to technological frontier from two different perspectives,domestic and international,in order to better examine the impact of the development of small and medium banks on the improvement of corporate productivity.In the existing literature,the firm’s distance to technology frontier is always measured by a single view of the domestic industry level or international industry level,however,firms’ catch-up may occur in the domestic industry level as well as the world level.Therefore,this thesis considers the distance to the technological frontier at the domestic level as well as the international level,when the mechanism of the impact of the development of small and medium-sized banks on the growth of corporate productivity are investigated.It is found that the conclusions obtained under the two measurement methods are relatively consistent,which confirms the robustness of the setting of the distance in different dimensions,and provides a reference for the analytical tools and testing methods in related fields.Third,this thesis shows that the impact of the bank credit on the growth of corporate productivity,relies on the technical status of the enterprise itself,that is,it is more conducive to improving the technological catch-up speed of the latecomer firms.This conclusion is highly consistent with the theoretical analysis viewpoints of Gong et al.(2014)and Zhang et al.(2016),which provides empirical evidence at the micro-enterprise level,and in concert with Lin and Long(2015)’s result based on the country level data.Fourth,this thesis shows that the small and medium-sized banks’ scale expansion has a positive effect on the latecomer firms’ technological catch-up,and has a more significant performance for small-scale enterprises.Thus,it provides evidence to support the “small bank advantage” hypothesis from the perspective of corporate catch-up.