Financial Development, Financing Constraints And Regional Enterprise Financing Behavior

Modigliani and Miller advanced M-M theory. Their point of view is that the enterprise’sinternal financing and external funding is can be an alternative in perfect capital market.However, real capital market is not perfect. Because the existence of information asymmetryand transaction costs, enterprise internal and external financing costs have differences.Enterprises are difficulty to finance by external financing channels. Consequently, enterprisesface the problem that it has not enough investment, and enterprises’ capital demand for theinvestment mainly depends on internal capital. FHP (1988) defined this problem be faced withenterprises as financing constraints. Enterprises in developing countries commonly face theproblems about financing constraints. This is a inevitable result of blocked financing channel.Enterprise internal capital accumulation is insufficient. Enterprise is not only difficult to getbank loans, but difficult to issue stock or bond. There are many factors that influence enterprisefinancial constraint level. The influence of the external financing environment is very obviousand major. How regions financial development level to affect the enterprise financial constraintlevel? And, how regions financial development level to affect the enterprise financing behavior,and then influence the development of the enterprise? TO give the answers about theseproblems is the purpose of this research. China’s economic has the basic features that regionaldevelopment is not balanced. Both economic development level and financial developmentlevel have greater regional differences in different area. Such financial environment contributesto examine the relationship between the regional financial development and the growth ofenterprise.this would help us to have more deep understanding about the microcosmicmechanism relationship between financial development and economic growth.For this reason, based on the environment that regional financial development is notbalanced, in this paper empirical research method is used to examine the relationship betweenthe regional financial development, financing constraints and the growth of enterprise. Thisarticle firstly analyses the research background and the related theory. Then, author selects thedata of listed company in three provinces which have obviously different financial developmentlevel as sample. By using the empirical research method, author examines the relationshipbetween the regional financial development, financing constraints and the growth of enterprise.Finally, this article acquires conclusion: enterprises have lower financial constraint level in thearea which have deeper financial development level; external financing environment hasobvious and major influences to enterprise’s financial structure. If enterprise has lower externalfinancial constraint level, this enterprise bank loan ratio is higher, and mainly bank short-termborrowing ratio is higher. At the end of the paper, author suggests how to improve the financialdevelopment degree to alleviate external financing constraints faced by enterprise, and theoptimize enterprise’ financing structure. These suggestions are helpful to development ofenterprise and improvement of economic efficiency.