Overcapacity: Microscopic Motivations And Economic Consequences

It's the enterprise who forms and resolves overcapacity,therefore,the micro basis of industrial overcapacity � enterprise overcapacity should be paid great attention to.Only by improving micro efficiency,can it converge to a macro structural improvement.As a main business financial consequences,the balance sheet must reflect overcapacity.This paper theoretically analyzed the typical performance of enterprises' overcapacity on assets turnover efficiency,and tested the microscopic formation mechanism of overcapacity and it's economic consequences,based on a case study and related literature.The purpose of this article is trying to uncover the�black box� of how the debt capital allocation and enterprise social capital affect overcapacity,and the mechanism of how the overcapacity affects enterprise innovation,in order to providing evidence for making policies of resolving overcapacity.First of all,this paper tested how do the credit financing and bond financing affect the enterprise overcapacity from the angle of debt capital allocation.This paper finds that,under the background of financial repression,the supply of low-cost credit funds reduces investment cost and transfers investment risk,thus stimulating capacity expansion,reducing the capacity utilization,and increasing the overcapacity probability;government intervention leads the credit resources leaning to state-owned enterprises,especially the local state-owned enterprises,which makes these enterprises' capacity utilization dropping more,due to capital allocation;industrial overcapacity does not necessarily lead to enterprise overcapacity,even improving their capacity utilization,due to their heterogeneity factors;bond financing also reducing the capacity utilization,along with the development of China's bond market.Besides,this paper discussed the influence of financial connection on the capacity utilization from the angle of the lateral social capacity.This paper finds that,financial connection reduces capacity utilization,and increases the overcapacity probability,under the background that the relationship-governance model still plays a role;bank connected enterprises reduce capacity utilization and increase overcapacity probability through the way of more bank loan,but the fact that broker connected enterprises damage capacity utilization through bond financing is not verified;state-owned enterprises' financial connection lower capacity utilization greater than private enterprises';there is the substitute effect between bank connection and broker connection;the more women managements,the worse the capacity utilization,while the managements with sales experience is the opposite.Further more,this paper analyzed the influence of political connection on the capacity utilization from the angle of the longitudinal social capital.This paper finds that,political connection lowers capacity utilization,and improves the overcapacity probability,under the background that the relationship-governance model still plays a role;the improvement of the governance environment can reduce the negative influence of political connection on the capacity utilization;the political connection firms mainly use long-term bank loan to reduce the capacity utilization;governmentconnection's negative effect on capacity utilization is more than delegation connection's;the political connection's negative effect on capacity utilization is stronger in state-owned enterprises and industries with excess capacity;there is substitute effect between political connection and financial connection.In addition,this paper studies the overcapacity's influence on innovation.The study finds that overcapacity rather than hindering innovation,it promote innovation;there is government support effect of overcapacity promoting innovation,rather than market competition effect;bank loan plays partial mediation effect between overcapacity and innovation.This study helps to identify overcapacity from a financial perspective,and helps to understand the micro forming mechanism and economic consequences more deeply,and can support the government making policies to resolve overcapacity.Finally,on the basis of empirical conclusions,this paper provided specific policies to resolve overcapacity from three aspects: improving efficiency of capital allocation,inhibiting the negative effects of social capital,and making policies to encourage innovation.