The Relationship Between Bank Credit And Investment Efficiency

As an important part of China’s financial system, the bank has always been the main source of corporate financing in China. The healthy development of the banking industry plays an important role in the development of China’s real economy. In the last ten years, China’s economy has maintained a sustained high growth. With the rapid development of the economy at the same time, the bank’s credit volume is also rapid growth. The financial crisis in 2008 is a very important leap in the time. Under the promotion of the national "four trillion" policy, the amount of credit in the banking institutions is an explosive growth since October that year. With the increasing demand of corporate finance, banking business development also needs to be followed the pace of innovation and development. Bank credit is a model of bank credit loan, which refers the commercial bank to give a certain enterprise in a certain period of time limit the loan amount. For banks, this financing model can reduce the loan approval process several times repeatedly, reduce labor costs, and ease of management as well. For enterprises, bank credit is a flexible favorable financing. Enterprises can adjust the loan amount themselves according to their own development needs and finance for a short time while the process is pretty simple. It also reduces the possibility of a one-time loan funds idle and does not require the corresponding mortgage assets, which will reduce the financing costs. Therefore, Bank credit has become a preferred way of financing for banks and enterprises.However, due to the not perfect development of China’s capital market and the government intervention in the market, the enterprise development in our country appeared unfavorable situation polarization:one is the financing difficulties of some small and medium-sized enterprises. It can be really hard for them to obtain the scarce resources of bank credit, so even if they may have a lot of good investment opportunities, they may lead to insufficient investment and low investment efficiency due to the funding constraints. Two is those kinds of enterprises which have plenty of resource and funds like large enterprises and state-owned enterprises and others. These enterprises investment behavior may not be efficient and rational due to the corporate governance and government interference and some other reasons. This may lead to excessive investment and low investment efficiency also. So the impact of bank credit on corporate investment efficiency in the end is to ease the shortage of investment or cause the excessive investment?Under such background, this paper studies the correlation between bank credit and corporate investment efficiency. This paper takes the FHP model as the foundation, studied the effect of bank credit on investment efficiency from the perspective of corporate financing constraints. Finally we found that the bank credit can allow enterprises to have sufficient funds to carry out investment activities by alleviating the way of enterprise financing constraints, which means that the enterprises can grasp their own high-quality investment opportunities for investment behavior, ease the lack of investment, and finally to improve the efficiency of corporate investment. However, to ease the excessive investment behavior, bank credit does not play an effective role. Then, the author studied the influence of the quality of accounting information, corporate governance and the quality of enterprises by the government investment in the correlations among bank credit and the enterprise efficiency using the principal agent theory and the asymmetric information theory. Finally found that:firstly, the enterprises with higher quality of accounting information tend to be more obvious in the improvement of the investment efficiency when the credit is obtained. The main reason for this is that the influence of the quality of accounting information can reduce the information asymmetry and let the enterprise managers and owners understand the business situation more clearly. So when the enterprise can access to credit to ease the financing constraints, it can effectively make the corresponding investment behavior and alleviate underinvestment situation. Secondly, the enterprises with higher quality of corporate governance tend to be more obvious in the improvement of the investment efficiency when the credit is obtained. The reason is that when the enterprise can access to credit to ease the financing constraints, the high quality of corporate governance system can reduce the principal-agent problems and let the enterprise managers take the enterprise benefit as the first starting point to carry on the rational investment. In this way, the enterprise can alleviate inadequate investment and improve their investment efficiency. Thirdly, the enterprises with lower level of government intervention also tend to be more obvious in the improvement of the investment efficiency when the credit is obtained. The main reason for this phenomenon lies in the enterprise with less government intervention is more market-oriented so the political purpose of the enterprise is smaller. So every investment decision made by the company is based on the interests of the enterprise. Usually this kind of enterprise financing constraint is generally greater, which can make them be more efficient in investment when the credit is obtained and alleviate the shortage of investment and then improve the efficiency of investment. Instead, enterprise with more government intervention generally has rich financing channels while their financing constraints are relatively small. And they assume more political purposes so the effect of credit granting on their investment behavior is not obvious, which means it can not play the role of improving the efficiency of investment.The main innovation of this paper lies in:firstly, the previous researches on bank credit are mainly focused on the banks’ own credit business loan management while few scholars pay attention to the management of credit objects before credit. This paper is mainly concerned with the choice of bank credit and focus on what kind of enterprise credit can make the maximum efficiency of funds and avoid resource waste. Secondly, in terms of the investment efficiency, the results of the present studies are very little concerned about the effect of bank credit on the investment efficiency of enterprises. Most scholars studied the influence of the enterprise’s own characteristics on their efficiency of investment such as the impact of ownership structure and corporate governance on the efficiency of investment. This paper, however, pay attention to the influence of bank credit on the investment efficiency of enterprises on the basis of previous studies and also take the enterprise accounting information quality and corporate governance quality factors into account.In this paper, there are also some problems in the process of research:first of all, the measurement of the accounting information quality, corporate governance quality and the degree of government intervention exist certain one-sidedness. For example, the quality of accounting information is measured by the DD model in this paper, which means it measures the quality of accounting information of enterprises by using the accrual earnings quality while the quality of other accounting information is not reflected. This leads to the possibility of the measured quality of accounting information may has one sidedness. The quality of corporate governance and the level of government intervention are also only used in some aspects of the representative which are not exhaustive. Secondly, for the selection of research samples, this paper only selects the A listing Corporation as the research object. So the research object may not represent the situation of all enterprises. Thirdly, the consideration of enterprise’s own factors is inadequate. This paper only divides the enterprise qualification by three aspects:the quality of accounting information and corporate governance and also the level of government intervention. The author believes that there are many other factors that affect the efficiency of the credit line so this paper has not been able to carry out the most comprehensive consideration.The overall structure of this paper is as follows:The first part is the introduction, which mainly describes the realistic background, significance, main content and the method used in this paper. Also, some innovations in the process of the research are summarized in this part.The second part is the literature review, which summed up the followed five aspects of the domestic and foreign related literature:The impact on investment efficiency of enterprises caused by financing constraints, accounting information quality, enterprise management quality, the level of government intervention and bank credit. This part mainly focuses on the theoretical basis of this paper and analysis the shortcomings of existing theories as well which provides the theoretical possibility for the innovation of this paper.The third part is the theoretical basis and research hypothesis. This part do more detailed explanation and analysis of the FHP model, KZ model, agent problem, information asymmetry and other theoretical basis used in this paper based on the part two. And on this basis, the author puts forward the research hypothesis.The fourth part is the design of empirical research. In this part, the Bushman et al and other foreign literature research models are used to calculate the efficiency of enterprise investment. Based on the Bushman et al model, this part also uses the HECKMAN model in order to avoid the possible existence of endogenous selectivity bias between bank credit and investment efficiency. In this way, it can avoid the effect of selective bias on the results of this paper.The fifth part is the empirical analysis part. In this part, the author collects data from listing Corporation during the five years from 2010 to 2014 and does the following several processing:(1) Excluding financial enterprises, (2) Excluding the company whose company’s net assets are negative, (3) Excluding the ST, PT and other special processing companies, (4) Excluding the company which has missing data. Finally we got 6306 study samples. Then, an empirical analysis of those sample data was carried out using the previous designed research models in this part and finally it verify the hypothesis proposed in this paper.The sixth part is the part of conclusions and recommendations. It summed up the empirical results and got the conclusions of this paper. In addition, this part put forward some possible suggestions to the banks, enterprises and relatively regulatory authorities based on the conclusion of previous empirical analysis as well...