Study On The Impact Of Financial Development On Total Factor Productivity Of Firms

Since China’s economy has entered the "new normal",the past crude model of economic growth driven by many factor inputs has failed to promote the sustainable development of China’s economy.The report of the 20 th Party Congress points out that efforts should be made to improve total factor productivity(TFP)and makes it one of the tasks within the major theme of promoting high-quality development.In addition,with the outbreak of the New Crown epidemic,China and the world economy have been greatly affected,the pulling effect of exports on the economy has gradually weakened,and there has been significant turbulence in the global financial markets.At present,if China wants to maintain sustained economic growth against the backdrop of a deteriorating domestic and international economic environment,it must improve TFP.Financial institutions can provide financing to companies to meet the needs of their business activities,thereby promoting their sustainable development.As enterprises are the main actors in market economic activities,improving their TFP is crucial to the quality development of China.Based on this background,it is important to study the impact of financial development on the TFP of enterprises in this paper.This paper collates and summarizes existing research,builds a theoretical framework on the impact of financial development on TFP based on relevant theories such as information asymmetry,and proposes research hypotheses accordingly.Then on this basis,data of A-share listed manufacturing companies from 2007-2021 were selected to study the impact of financial development on corporate TFP.A fixed-effects model is used for empirical testing,and the reliability of the research results is ensured by changing the measure of TFP of enterprises,excluding the influence of other factors and doing first-order and second-order lags on financial development variables.Secondly,the transmission paths of financial development affecting firms’ TFP are examined through two channels,namely,firms’ financing constraints and information disclosure quality.Finally,the impact of financial development on firms’ TFP is further analyzed from three perspectives: regional heterogeneity,heterogeneity in property rights and size heterogeneity.The findings show that:(1)financial development can significantly promote firms’ TFP.(2)Financial development improves firms’ TFP by easing financing constraints and improving the quality of information disclosure of enterprises.(3)Government subsidies have a negative moderating effect on financial development’s contribution to total factor productivity.As government subsidies increase,the positive relationship between both financial development and firm TFP becomes weaker.(4)In terms of regional heterogeneity,financial development promotes TFP more in the eastern region than in the central and western regions;in terms of heterogeneity of property rights,financial development significantly promotes TFP in nonstate enterprises compared to state-owned enterprises;in terms of heterogeneity of enterprise size,financial development contributes more to the improvement of total factor productivity in small and medium-sized enterprises than in large-scale enterprises.Based on the above research,this paper puts forward relevant policy recommendations from both enterprises and the government in order to improve the level of financial development and promote enterprise TFP.