Research On The Influence Of Product Market Environment And Director’s Background Characteristics On Financing Constraints

In the past 30 years,Chinese enterprises have made great progress,but they still face many bottlenecks and restrictions,among which financing constraints are the most prominent.The existence of financing constraints will not only limit the development of enterprises,but also affect the efficiency of capital allocation in the capital market,and even hinder the development of society as a whole.Scholars have discussed the causes of financing constraints from the information asymmetry and agency conflicts,and also discussed the influence of external environmental factors,such as laws,rules and market environment,on the financing constraints.However,these scholars have studied the emergence of financing constraints,and the relationship between the external environments and financing constraints,all of which are analyzed based on the situation of the western developed countries,failed to consider the special nature of economic transformation.Then,under the background of China’s transition economy,how will market competition,government intervention and investor legal protection affect the financing constraints of enterprises? Is there a big difference of this effect between china and the western countries,and can this difference make the extent of financing constraints differ greatly? The study of these problems will help to better understand the reasons for financing constraints in Chinese enterprises.Although enterprises are restricted by the external environment,enterprises will take measures to deal with the limiting factors and uncertainties in the process of resource acquisition,including adjustment within the enterprise organization.Through changing the structure of staff including co opted into the company’s board of directors,enterprise can deal with the risks and uncertainty arising from the process of exchanging resource between enterprises and other organizations.Directors with rich career backgrounds alleviate financial constraints through resource effects,information effects and relationship effects.Directors with professional background can create innovative financing programs for enterprises,and also can use their work experience and expertise to reduce business risk and financing risk.The directors also can carry out effective communication with financial institutions;reduce enterprise transaction cost in the process of financing,such as negotiation cost,contract design cost and penalty execution cost.Directors with rich occupational background can help transfer the key information,such as credit status,business performance and development prospect,so as to reduce the degree of information asymmetry between enterprises and other financial institutions.The hiring of directors with financial institutions work experience and rich business experience background is useful for enterprises to establish a network including potential investors,financial institutions and the relevant regulatory authorities.This network can help enterprises timely informed or respond to decision-making of financial institutions and related regulatory organization.On the other hand,scholars began to study the appointment of directors with rich background from 1980 s,and make people gradually realized the appointment with a variety of background of the directors is determined by the uncertainty and risk arises form external environment of enterprise.When the external environment of enterprises is poor,the board of director is more likely to introduce directors with government and bank background.Through the interpersonal relationship and the accumulation of experience,these directors can help enterprises obtain support from government and bank.In China,It has become a trend for enterprises to employ directors with many backgrounds.In the days enterprise operating gradually standardized,is the emergence of these directors adapt to the increasingly fierce product market environment? Can directors with all backgrounds,employed in order to adapt to the product market environment,reduce the uncertainty of the environment and help enterprises to access key resources,such as financing convenience? Is the external product market environment affected financing constraints through the intermediary role of the directors’ background characteristics?Based on the above research background,according to the research methods of "changes in the external environment-the board members--the background characteristics of resource acquisition ability",using the data of the Chinese listed companies between 2007-2015,this paper analyses the impact of product market environment,market competition,government intervention and the legal protection of investors on corporate financing constraints,and the intermediary role of background characteristics.(1)Product market competition can increase the financing constraints of enterprises by enhancing the symbiotic dependence between enterprises and financial institutions,or by the asymmetry of competitive dependence between enterprises and competitors.Product market competition can also restrict the flow of information through the potential competitors to prevent competitors from the predatory threat,increase the degree of information asymmetry between enterprises and external financial institutions or investors,improve the risk premium requirements,and increase enterprise financing constraints.(2)Moderate government intervention can ease the financing constraints of enterprises by changing the asymmetric dependence and asymmetric information between enterprises and resource owners.In the product market environment,the influence of government intervention on the financing constraints of enterprises is not always a positive effect.The government also has an appropriate degree of intervention in the financing of enterprises.Excessive government intervention has obvious characteristics of plunder,which may cause enterprises to rely too much on external financing,and increase financing constraints.(3)Legal protection of investors including in the product market environment in can reduce corporate financing constraints.That is,the degree of investor protection is helpful to improve the symbiotic asymmetric dependent relationship between financial institutions,enterprises and investors,thus weakening the enterprise financing constraints.The level of investor protection can also reduce the information asymmetry between enterprises and investors through the improvement of information disclosure,sending a good signal to the investors in the stock market,so as to reduce the financing constraints.(4)The product market competition,government intervention and the legal protection of investors will have an impact on directors with professional background,business background and public service background.Adapting to the change of market environment,enterprises will adjust the internal structure to find appropriate board of directors in line with the future development prospects of the industry,which include co opted representatives to the board of directors,in order to maintain good relationship with external key stakeholders.There is essentially a matching relationship between the external product market environment and the directors to be appointed by the enterprise.(5)The effect of the market competition,government intervention and the legal protection of investors on corporate financing constraints is not only a direct effect.Through employing appropriate directors,the enterprises also can enhance their ability to obtain resources,alleviate the degree of financing constraint.Directors play an intermediary role between product market environment and financing constraints,through its resources effect,information effect and relationship effectOn the basis of the existing literature research,this paper studies the relationship between the product market environment,the director’s background characteristics and the financing constraints.The possible innovations are mainly embodied in the following aspects:Firstly,In the content of research,this paper analyzed the influence of product market environment on enterprise financing decision systematically.Based on the collection of a large number of domestic and foreign related research results and theoretical literature,this paper choose the three attribute of products market environment,that is government intervention,the degree of market competition and legal level as elements of product market environment.From the perspective of resource dependence and information asymmetry,this paper analyzed effect made by the strength of relationship between product market environment and enterprises on financing constraints.This put forward relevant assumptions.This effect helps to understand and understand the relationship between the product market environment and the financing constraints of enterprises more comprehensively,and expands the understanding of the financing constraints in the context of China by the theory of resource dependence and the theory of asymmetric information.In the content of research,this paper make up for the shortage of financing constraints from a single point of view,and help to better understand the formation of financing constraints.At the same time,this paper takes the product market environment and the director’s background characteristics and financing constraints into a framework for the first time.The research of domestic and foreign scholars on the product market environment,such as literature product market competition,government intervention and the legal protection of investors is few,literature on common impact of product market environment and board background characteristics on financing constraints less.Through the method of intermediary effect,the analysis of the information asymmetry theory,resource dependence theory and financing theory,the method using "products market environment--directors background characteristics-resource acquisition ability",this paper found the relationship between product market environment,the background characteristics and financing constraints and bring them into a a unified analytical framework,which can analyze the relationship between product market environment and financing constraints more systematic and comprehensively.Secondly,in the research method,this paper empirically analyzed how product market including market competition,government intervention and the legal protection of investors influence the financing constraints through the mediating effect of directors’ background characteristics.In this paper,the sequential test and the difference test are used in the test of intermediary effect.The robustness test of the influence path is carried out by means of the coefficient product term test.At the same time,because the background may be endogenous,this paper uses the method of instrumental variable method and GMM to test,in order to get an unbiased and consistent estimator of parameters between the product market environment,the background characteristics and corporate financing constraints.Finally,the value of directors’ background is strictly positive and between 0 and 1,it is not suitable to estimate with linear model.Therefore,the panel Tobint regression random effects model is used to estimate the determinants of the board members’ background characteristics.Thirdly,In theory,this paper integrates the information asymmetry theory and resource dependence theory,analyze the effect of the product market competition,government intervention and the legal protection of on financing constraints,by changing the information asymmetry between enterprises and financial institutions or investors,or changing the asymmetric dependencies between corporate and financial institutions and investors and other organizations owned resources.This will help to understand the relationship between the product market environment and the financing constraints of enterprises more comprehensively.It extends the theory of resource dependence and the theory of asymmetric information to the understanding of financing constraints in the context of china.At the same time,according to the information asymmetry theory,financing theory and resource dependence theory,this papers analyzed how directors with rich career background,adapting to the external environment pressure,ease the financing constraints of enterprises through resource effects,information effects and relationship effects.This paper breaks through the understanding of the role of director’s background based on a certain theory,and helps to understand the role of directors in enterprise resource acquisition more comprehensively.