The Determinant Of Soft Budget Constraint: Theory And Empirical Evidence

Since Kornai raise the conception of soft budget constraint in 1980, a lot of scholar had researched the cause that it engendered, there is no common conclusion so far. Soft budget constraint brings many problems in economy, such as the moral risk of firm manager and bad debt in bank. If we want to eliminate the problem, we must know what soft budget constraint cause is. In the paper, we discuss the determination of soft budget constraint in virtue of a model of government expend. Though the mode analyzed, we found that the more resource that government control, the bigger possibility that soft budget constraint happen. We used the Logit model as analyses tool and choose the data that high debt China's listed firm between 2001 and 2004. We found the empirical result is the same to the model analyses. The find also means that soft budget constraint systemically exist in China's listed firm (at least high debt firm). Moreover, our empirical result also indicates soft budget constraint in China's listed firm doesn't root from bank's Ex-post efficiency in DM model. We hope our model has a academic contribution in solving the soft budget constraint.The paper divides into 6 totally chapters. Chapter one shows the purpose of the paper. As the result that there is no common conclusion about the cause of soft budget constraint, it will be a academic contribution if we can find a model that is more explain range. Chapter two is the paper summarization. We summarize the representational theories of soft budget constraint since Kornai raised the conception of soft budget constraint. It is academic analysis and research supposes n chapter three. We founded a soft budget constraint model in virtue of government expend behavior, and raised two supposes. In suppose one, the more financial and credit resource controlled by government, the more possibility soft budget constraint happened. In suppose two, the higher degree of governmental dependence is, the more possibility soft budget constraint happened. Chapter four shows research design. In the first, we defined financial and credit resource controlled by government and the degree of governmental dependence, then we chose Logit model as analyzed model, then describe other control variables, in the end, we chose list firm between 2001 and 2004 as research sample. It is empirical result and analyses in chapter five. The result supports the supposes in chapter three through one-way ANOVA and OLS regression and sensitive test. Chapter six shows the conclusion and policy significance. Our research shows that soft budget constraint consists in China's listed firm (at least in high debt firm). Moreover, our empirical result also indicates soft budget constraint in China's listed firm doesn't root from bank's Ex-post efficiency in DM model. Our academic significance is that we should consider the effect from soft budget constraint, when bank finance high-debt China's listed firm.