The Effects In Corporate Governance When Bank As A Creditor

Regardless of the developed or developing countries, small and medium sizedenterprises, or SMES in short are an important pillar of developing the nationaleconomy, as they play an irreplaceable role in promoting scientific and technologicalprogress, improving the rate of resource allocation, creating new job opportunities,increasing import and export and enriching industrial clusters. In theoretical circles, itis generally believed that the SMES further developments are restricted by presentsystems. Among them, the most prominent is undoubtedly the SME external financingobstacles, it makes the development of SMES largely been limited to the narrowscope of self-financing, as a result the development potential and speed will berestricted. In the structure of debt financing, bank loans are the most important one inthe form of debt financing for SMES. According to statistics, SME Bank liabilities tothe total accounted for about a half. Therefore, it is very important to the analysis ofthe governance role of the SME bank debt and of the relationship between bank loansand enterprises market value. Another reason is that most of China’s listed companiesenjoyed a state-holding nature, thus this article selects growth enterprises listed as abreakthrough point of studying the bank credit and corporate governance. It is wellknown that state-owned enterprises have a great challenge in principal-agent issues,while SMES could better reflect their market value thanks to their outstandingperformance in market competition. Due to this point, this study can provide for us anew way to the further improvement of the governance of our bank debt.This article explores the effect of corporate governance of China’s SMES inbanking claims on China’s actual situation in absorbing the successful effect of thetreatment of domestic and foreign liabilities, the bank on the basis of corporategovernance theory and empirical research. Based on the related theories of capitalstructure and the efficiency of debt governance, the paper is oriented to a profoundresearch to the country’s banking claims on the governance effects of listedcompanies by regarding growth enterprises listed as a breakthrough point of studyingthe bank credit, with a combination of the agency cost, the equity structure, the control right and the free cash flow effects. On this basis, it focuses on the signalingtheory, incentive theory, and the camera-Control Theory and the governanceadvantages of the bank as a creditor. This article selects SMES listed before2007andstudies their performances from the year of2007to2011based on the abovetheoretical analysis, here comes the conclusion, either short-term debt or long-termone of the public bank liabilities are negatively correlated with corporate performance,that is to say, the bank debt does not play a catalytic effect on the corporate, whichcould be back to refine empirical test of long-term and short-term bank loans, therelationship between bank debt and corporate performance as well as that of the freecash flow and agency costs. Through the learning of return of the agencycost-effective, the negative relationship between short-term bank liabilities andagency costs, the positive one between long-term bank.Finally, on the basis of empirical research and a further analysis on theconclusion，this paper would present some policies and advices from the aspects ofimplementing more radical market-oriented reforms to commercial banks, allowingbanks to conduct a strategic shareholding to the lending business, improving the banks’function of financing to Market for corporate control and information transfer,improving the corporate loan approval process, the terms of the contract and debtservice law system as well as protecting rights and interests of creditors.