The Effection Of Institutional Background And The Credit Booms On Bank Credit Allocation

Non-state-owned enterprises can’t enjoy the same treatment with the state-ownedenterprises in many ways, even suffer discrimination. Among them, the creditdiscrimination is an important aspect. Relative to the non-state-owned enterprises，state-owned enterprises are lower efficiency and less profit. When distributing too muchfund into state-owned enterprises, it may cause in-efficient capital allocation. In this paper,we analyse two factors’ affection to the bank credit allocation, that is institual backgroundand credit booms. Through the analysis above, two hypothesis to be tested are proposed inthis paper: Firstly, in the well-developed institutional background area, that is, lessgovernment intervention, a higher degree of financial development and better legalinstitutional environment may relieve the discrimination suffered by non-state-ownedenterprises; Secondly, with credit booms, the differences of credit allocation betweenstate-owned enterprises and non-state-owned enterprises may also be weakened.With the1997-2007NERI INDEX of Marketzation of China’s Province database, themain conclusions are presented in the following two aspects. The first, in areas with lessgovernment intervention and good law institutional environment, more credit funds maybe distributed to non-state-owned enterprises. However, financial development doesn’thave significant impact on distributing credit funds. The reason may be commercializationreform in the bank system of our country. From then on, the bank has more rights indistributing the credit funds. In order to earn higher profit, they distribute more creditfunds to non-state-owned enterprises who will bring higher return. The second, whencredit boom appears, the financing difficult suffered by non-state-owned enterprises canalso be reduced. Therefore, the state-owned banks should transform their concept, reformproperty rights, refine incentive mechanism and credit risk management system; Thegovernment should reduce intervention and transform its function from leading to service,promote the emergence of the credit booms. Then, non-state-owned enterprises wouldenjoy a better financial environment which contributes to the balance of bank industry inthe near future.