Financial Development And Financing Constraints

Since the reform and opening up, the financial sector of China has been exercising rapid development. However, the level of financial development in each region and in each stage of banking reform of China varies with regional resource endowment and the national policies, which lead to fundamental changes in corporate external financing environment. Based on the corporate liquidity management, the paper examines the effect of regional financial development and banking reform on financing constraints of listed companies, and then investigates the effect between companies with different nature.The research suggests that there exists the sensitivity of cash holding to cash flow among listed companies, which indicates that a lot of listed companies are subjected to financing con-straints. The regional financial development can reduce cash-cash flow sensitivity of listed com-panies, especially private listed companies. However, banking reforms began in 2003 play a small role in easing financing constraints, which shows that the cash flow sensitivity of cash re-duces in state-owned listed companies but is unchanged in private listed companies. Overall, the paper not only complements China's evidence of the role of financial development on financing constraints, but also provides a reference for the further banking reform of China.