The Study On Some Influence Factors On China's Capital Allocation Efficiency

The improvement of capital allocation efficiency is an important way topromote economic growth and realize the change of economic growth mode. Atpresent, Chinese economy is in the key period of reforming and developing?thescarcity of capital is prominent?it is no doubt that the improvement of capitalallocation efficiency will influence the reform process and the economic growthtrajectory deeply. Thus, a systemic discussion on the facors affecting Chinese capitalallocation efficiency is significant to the continuable, repaid and healthy growth ofChinese economy.In this paper, the definition of capital allocation efficiency is given, the commonmethods for estimating the capital allocation efficiency are introduced, the findingsabout the factors affecting Chinese capital allocation efficiency published inliteratures are also summarized. Then based on the estimation model proposed byWurgelr(2000), we construct some interaction effect models, and test the effects oflegal protection of investors, quality of listed company's information disclosures andpolitical connection on the Chines capital allocation efficiency. The major works aresummarized as following.1. The realistic meaning of discussing the influence facors on China's capitalallocation efficiency is elaborated, the content and innovation of this paper isintroduced, and the related literatures is summarized.2. The definition and category of capital allocation efficiency are given, twocommon ways used to estimate capital allocation efficiency are introduced, and tworequirements for efficient capital allocation are analysted, furthermore, the influencefacors on China's capital allocation efficiency that have been dicussed in literatursare summarized.3. The mechanism that the legal protection of investors can improve capitalallocation efficiency is analysted, with the agency by agreement theory and somerelated theories in law and finance fields, and given the special economyenvironment of China, we discuss whether the government could weaken thepositive effect of legal protection of investors on capital allocation efficiency byintervening the implement of related laws. Furthermore, the effect of legal protectionof investors on Chines capital allocation efficiency is tested, with data of Chinese thirty regions and thirty-six industries from the year2001to2006, and the role of theintervention of government is also considered. The findings indicate that in bothregional level and industrial level, the interactions of degree of legal protection oninvestors with value added growth rate have obvious positive coefficients, whichreveals that legal protection on investors can benefit the capital allocation efficiency.In addition, we find that the government could weaken the positive effect of legalprotection of investors on capital allocation efficiency by intervening the implementof related laws. The The findings imply that for improving the Chines capitalallocation efficiency, the legal protection system of investors should beconsummated and the intervention of government on market should be greatlyreduced.4. The mechanism that higher information discloure can improve capitalallocation efficiency is analysted, Asymmetric Information theory. Then the effect ofinformation discloure on capital allocation efficiency is verified with with data ofA-share companies listed in Shen Zhen Stock Exchanges from the year2003to2012.We find that with the increase in the information disclosures quality, the reaction ofindustry investment alteration to its capital output alteration becomes more sensitive,which means that information disclosures with higher quality promote capitaltransfer rapidly form lower returning fields to higher returning fields, thus realize theefficient allocation of capital. The findings provide theoretical basis for improvingthe information disclosure system and enhancing the supervision on listedcompanies' information disclosure.5. The mechanism that political connection may reduce capital allocationefficiency is analysted, then we discuss whether the political connection will reducethe capital allocation efficiency, with data of A-share companies listed in Shen ZhenStock Exchanges and Shang Hai Exchanges from the year of2003to2012. Theregression analysis show that the interaction of political connection and capitaloutput growth rate have obvious negative coefficient, which means that politicalconnection prevents capital from transferring rapidly form lower efficiency fields tohigher efficiency fields, thus reduce the efficiency of capital allocation. The findingsprovide proofs for further advancing market reforms and reducing the intervention ofgovernment on the market. In addition, the findings also indicate that the informalsystem is inefficient.