Research On The Formation Mechanism And Effects Of Financial Resource Misallocation In China

With the development of modem economy,capital accumulation and technology innovation are two important ways for finance to promote economic growth.The main function of financial system is to help allocating resources between different regions or countries in an uncertain environment.However,from the perspective of the development of major economies in the world,the lack of resources and the shortcomings of technology innovation are not the main causes for the slow economic growth,but the resource misallocation.Resource misallocation makes it impossible for resource to be allocated in an efficient way,which hinders the pace of economic growth to some extent.Since the global financial crisis exploded,with the changes in domestic and international economic environment,the factor cost of China's entity economy has been continuously improved.Since China is still dominated by a state-steerig financial system,enterprises who owned more credit resources are not efficient.The prevalence of financial resource misallocation has gradually reduced the efficiency of finance service entity economy.Therefore,it is of great significance to explore the formation mechanism and effects of financial resource misallocation in order to propose policy recommendations in a targeted manner which can improve the efficiency of finance service entity economy.Focusing on the theme of financial resource misallocation,this research mainly studies two major problems:(1)the formation mechanism of financial resource misallocation in China,including the internal formation mechanism and external formation mechanism;(2)the analysis of the effects of financial resource misallocation.In this part,this research studies the effect of financial resource misallocation among industries and among enterprises separately.In view of the effect of financial resource misallocation among industries,this research mainly explores the derogative effect of financial resource misallocation on total factor productivity.In view of the financial resource misallocation among enterprises,this research mainly explores two aspects,including the derogative effect of financial resource misallocation on investment efficiency and the risk effect of financial resource misallocation.Specifically,on the one hand,financial resource misallocation leads to the difficulty of obtaining credit finance for enterprises with high output efficiency,which has a negative impact on the investment efficiency.On the other hand,enterprises with low output efficiency can still obtain credit finance due to a series of non-marketing factors.As a result,these enterprises will broaden their investment channels,in the case of low profitability of their main business,they will turn to areas with high-profit and high-risk.In view of the formation mechanism of financial resource misallocation,this research finds that there are intermal factors and external factors that result in financial resource misallocation.Internal factors include market factors such as information asymmetry,unreasonable interest rates.External factors include ownership discrimination,government's preference for public enterprises,market segmentation which caused by tax-sharing reform,local government intervention and soft budget constraints.In the development of China's transformational economic growth,the cause of financial resource misallocation in the real level and the institutional level do not function independently,but are interwined.In view of the derogative effect of financial resource misallocation on total factor productivity,this research mainly bases on the financial resource misallocation among industries.Firstly,it establishes a multi-sector competition equilibrium model with sector-specific friction based on Aoki's framwork.Continuously,this research adopts the indirect meaure method which applys all possible distortions to the“tax wedge”.At the same time,the factor flow coefficient and the factor relative distortion coefficient are introduced to characterize the level of resource misallocation.By expanding the traditional Syrquin decomposition,this research decomposes the resource allocation effect into the price distortion effect of resources and the industry sharing effect,and explores the derogative effect of misallocation on total factor productivity among various industries in different years.On the basis of theoretical analysis,Using firm-level data of Chinese A-share listed companies from 2008 to 2017,this research tests the derogative effect of financial resource misallocation on total factor productivity.This research finds that the capital price distortion leads to unequal status of different enterprises in financial markets.However,form the perspective of changing trends,the capital price distortion in most industries in China is gradually being rectified.Economic growth has gradually shifted from relying on factor input to resource reallocation and structural reform,informing that rectifying the financial resource misallocation will play a certain role in promoting the overall development in China.In view of the derogative effect of financial resource misallocation on investment efficiency,this research mainly bases on the financial resource misallocation among enterprises.It builds a theoretical model of the effect of financial resource misallcation on investment efficiency based on MM theory in modern capital structure theory.Further,in the hypothesis of MM theory,this research analyzes how the financial resource misallocation conveys the distortion to the investment efficiency in entity economy by distorting the debt financing attributes of capital structure.On the basis of theoretical analysis,using firm-level data of Chinese A-share listed companies from 2008 to 2017,this research empirically tests the impact of financial resource misallocation on non-efficiency investment,under-investment and over-investment.It also discusses the intermediary effect of capital structure between financial resource misallocation and investment efficiency.This research shows that financial resource misallocation has a direct transmission mechanism on investment efficiency,it leads to a significant increase in non-efficiency investment in Chinese enterprises.From the perspective of ownership,financial resource misallocation leads to serious under-investment in private enterprises;From the perspective of scale,financial resource misallocation leads to a deepening over-investment in large-scale enterprises;From the perspective of industry,financial resource misallocation leads to over-investment in real estate enterprises which has a crowding-out effect on manufacturing enterprises.Further analysis shows that financial resource misallocation has an indirect transmission mechanism on investment efficiency.The capital structure plays a intermediary role between financial resource misallocation and investment efficiency.The financial resource misallocation causes the financial resource allocation deviating from the optimal economic state of Pareto by disorting the market governance attributes of capital structure,which further led to the inefficient investment.In view of the the risk effect of financial resource misallocation,it constructs a theoretical model of financial resource misallocation on corporate risk based on the trade-off theory.Using firm-level data of Chinese A-share listed companies from 2008 to 2017,this research explores the effect of financial resource misallocation on corporate risk.The result shows that,on the one hand,the financial misallocation pushes up the leverage of enterprises and increases the corporate risk.On the other hand,it weakens the operating efficiency of enterprises and increases the corporate risk.Therefore,optimizing the allocation of financial resources has positive significance for promoting strict supervision of financial industry and preventing debt risks.Based on the analysis of the previous chapters,this research further proposes some policy recommendations in an attempt to make some contributions to improve the efficiency of financial resource allocation,such as developing financial market system with capital market as the core,promoting the cooperation of large and medium-sized financial institutions,optimizing the supervision concept and so on.However,this research also has some shortcomings in both the theoretical and empirical parts.It lacks in the research on the dynamic effect of financial resource misallocation.At the same time,this research needs to further analyzing the financing availability from the non-bank financial institutions such as the trust and investment company,leasing company,insurance company and finance company.