Regional Policy And Debt Finance

Government has palyed an important role in the economic operation in China. As a key method to guide and moderate the macro-economy, regional policy is a key macro-policy in China’s Economy. Macro-policy would influence the behavior of micro individuals, here for example, companies. This paper tries to understand how regional policies, as important macro-policies, will influence the behavior of companies.Specially, we examed how the bank loans of listed companies would be affected by national-level regional policies. Using the data of Chinese A-stock listed Companies from1993-2011, we find that, generally, companies in places supported by regional policies have access to more bank loans. While, such a positive effect diminishes as time goes on, it does not completely disappear.We also try to exam whether the influence of regional policies on bank loans would change as time passes. We find that as time passes, the positive effect of regional policies on bankloans will reduce, but will not completely disappear.We further class bank loans into two types according to their maturity and find that when an regional policy first comes into effect, the increase of long-term bank loans is more significant. However, for a long period of time, companies in places with regional policies are inclined to replace long-term bank loans with short-term ones. We further exams how the nature of ownership and the extent of marketization will affect the relationship between regional policies and firm debt finance. The empirical results show that for state-owned-enterprises, the changes of debt finance related with regional policies will be strengthened. For companies in provinces that more market-oriented the changes of debt finance are also strengthened, but whatever the stages of regional policies, companies in these places are more likely to replace long-term loans with short-term ones.