Empirical Analysis Of Enterprise Financing Condition And Business Performance During Financial Crisis

This paper tries to examine the relation between the financing conditionand business performance of China’s manufacturing enterprises during thefinancial crisis period.The paper found that state-owned enterprises, large enterprises andenterprises in the western provinces tend to view the4trillion stimuluspackage as the most important economic policy to help them recover from thefinancial crises. Meanwhile, median and small enterprises as well as those inthe eastern provinces weigh moderately easy monetary policy and a potential10%depreciation of RMB heavier than peers. Large enterprises obtain moreloans in the past3quarters than small enterprise and the ratio is higher foreastern enterprises than those in the west. As for the private equity investments,PE is more active in non-SOEs and in recent years, enterprises in the westernprovinces are more likely to become the target of PE investments.We also examined the trend of enterprise business performance and it’srelation with new loans during the period. We found that the amount of newloan raises a lot for state-owned enterprises in the second half of2008and thespeed of increase slows down in the first half of2009. In comparison, the newloans for FDI, share-holding companies and private-owned companies increasesharply in the year of2009. In the paper, we found that debt ratio andutilization rate of equipment have positive impact on the recovery of enterpriseperformance, while accounts receivable ratio and inventory ratio have negativeimpact on business performance. We also prove that new loan has a positiveimpact on the recovery of enterprise business performance using fixed effectmodel.