Research On The Impact Of Capital Misallocation On The Behaviors Of Chinese Industrial Enterprises

Currently,China's economy is in the transitional period from the quantity of economic growth to the quality of economic development.Deepening the structural reform on the supply side has become a crucial way to improve the overall productivity level of society and realize the high-quality development of China's economy.As the micro-subject of economic activities,enterprises are the basic individuals constituting the supply side of the economy.Studying the micro-enterprise behavior and exploring the mechanism factors to improve the competitiveness of enterprises play an important role in promoting the structural reform of the supply side.On the other hand,reforms in China's financial sector lag behind,leading to the fact that capital misallocation has become a major obstacle to the development of Chinese enterprises.Therefore,the main objectives of financial reforms are to deepen the structural reform of the financial supply side,eliminate institutional discrimination faced by enterprises in the financial market,improve the structural distortion of capital and financial markets,and enhance the economic capacity of financial service entities.However,existing literature mainly focuses on the total factor productivity loss caused by capital misallocation and the causes of capital misallocation.There is still a lack of research on the impact of capital misallocation on the behavior of micro-enterprises in the real economy.In view of this,based on the monopoly competition model of heterogeneous enterprises and the micro-data of Chinese industrial enterprises,this paper calculates the misallocation of industrial capital in China,and then constructs theoretical and empirical models to study the impact of capital misallocation on enterprise behaviors.It elaborates from four aspects,i.e.overcapacity,enterprise scale,export behavior and enterprise entry and exit,implicating that capital misallocation has a complex impact on corporate behavior.The main findings can be concluded as follows:(1)There is significant industry heterogeneity in capital misallocation in China's industrial sector.According to the single-digit industry of national economic classification,the degree of capital misallocation in mining industry is the highest,followed by that in power,gas and water production and supply industry,with that in manufacturing industry the lowest.From the perspective of double-digit industry,industrial capital misallocation is negatively correlated with the degree of industrial market competition.That is to say,industries with high market competition have a low degree of capital misallocation.The top five industries regarding to the degree of capital misallocation are,ferrous metal mining and processing industry,non-ferrous metal mining and processing industry,petroleum processing,coking and nuclear fuel processing industry,and other mining,oil and gas mining industries.(2)Capital misallocation has a remarkably negative impact on the productivity utilization rate of Chinese industrial enterprises.It significantly reduces the productivity utilization rate of normal enterprises,but at the same time significantly improves the productivity utilization rate of zombie enterprises.Mechanism analysis shows that capital misallocation mainly improves the productivity utilization rate of zombie enterprises through government subsidies,while it has no significant impact on corporate tax burden of zombie enterprises,and thus there is no channel effect through corporate tax burden.(3)Capital misallocation greatly enhances the scale distortion of Chinese industrial enterprises.It is positively associated with the scale of enterprises,and has the greatest effect on the scale of state-owned enterprises but the weakest effect on the scale of private enterprises.Moreover,by regarding the low productivity of large enterprises and the high productivity of small enterprises as distortions of enterprise scale,we examine the impact of capital misallocation on distortions of enterprise scale.Results show that capital misallocation significantly increases the probability of scale distortion.Besides,the higher the proportion of zombie enterprises,the higher the probability of scale distortion;and the higher the degree of zombie industry,the greater the impact of capital misallocation on the probability of low productivity distortion of large enterprises in the industry.In other words,the aggravation of the degree of zombie makes more capital misallocated to larger but less efficient enterprises in the industry.In addition,zombie enterprises also magnify to some extent the inhibition of capital misallocation on the growth of efficient small enterprises,making the scale of high-productivity enterprises in the industry smaller.(4)Capital misallocation evidently pushes up the export distortions of Chinese industrial enterprises.The aggravation of capital misallocation increases the export probability of foreign-funded enterprises,decreases that of private enterprises,and has no significant impact on that of state-owned enterprises.Furthermore,capital misallocation aggravates export distortions.Channels studies indicate that capital misallocation increases the degree of export distortions through an increase in the government subsidies of enterprises;at the same time,it also increases the degree of export distortions through an decrease in the tax burden of enterprises.Last but not least,government subsidies and enterprise tax burden show some mediating effects.(5)Capital misallocation raises the entry distortions of state-owned enterprises and foreign-funded enterprises,and has no significant impact on private enterprises.Moreover,Capital misallocation reduces the exit distortions of state-owned enterprises,improves the exit distortions of private enterprises,and has no significant impact on the exit of foreign-funded enterprises.Zombie enterprises have a “screening effect” on enterprise entry,which increases the entry threshold of enterprises.At the same time,they also have a “crowding out effect” on enterprise exit,which decreases the exit threshold of enterprises.In addition,capital misallocation increases the distortions of enterprises entry by increasing the probability of subsidies,and increases the distortions of enterprises' entry and exit by reducing the intermediary effect of enterprise tax rate.Put another way,It is better to have a lower enterprise tax rate.Reasonable tax rate is helpful to increase productivity and eliminate inefficient enterprises from the market.This paper contributes to the existing literature in threefold.Firstly,it adds new findings to the research frontier in the field of factor misallocation,especially in the field of capital misallocation.By discussing the impact of capital misallocation on the behavior of Chinese industrial enterprises,it promotes the new research field of factor misallocation,and expands the related research of capital misallocation on micro-enterprise behavior.Secondly,based on the logical deduction or mathematical model,this paper investigates the micro-mechanism of capital misallocation on enterprise behavior,and elaborates the relationship and mechanism between capital misallocation and enterprise productivity utilization,enterprise scale,enterprise export,enterprise entry and exit,which theoretically enriches the research field of capital misallocation.Finally,this paper empirically analyses the impact of capital misallocation on productivity utilization,enterprise scale,enterprise export and enterprise entry and exit,and further discusses the impact of capital misallocation on the productivity utilization of zombie enterprises,the relationship between enterprise scale and productivity,the relationship between enterprise export and productivity,and the relationship between enterprise entry and exit and productivity.This study is of great significance in implementing the reform of China's financial sector and further promoting the quality of enterprise supply.