A Study On The Relationship Between Bank’s Loan And Corporate Governance

The financial crisis occurred in America in2008reveals a problem that thecommercial banks all over the world ignore the awareness of risk identification andrisk control. Though the crisis doesn’t have a significant impact on commercial banksof China, it also gives us a good lesson: we must put the awareness of riskidentification and risk control a more important position. China’s commercial banksput more attention to the company’s financial indicators when signing the debtcontract with enterprises. However, more and more researches find that thecommercial banks cannot identify the earnings management, so the financialinformation’s usefulness in the process of decision-making is harmed. Theinformation on corporate governance which cannot be manipulated by the company isthe most basic and the most stabilized information. And the better the condition of thecorporate governance, the less information asymmetry have between banks andenterprises, and good corporate governance can reduce risk of bank operating. Socommercial banks should pay more attention on the company’s corporate governancewhen they make lending decisions. For long time, the Chinese scholars have not beinginterested in and involved the study on how the corporate governance influencing thebank loan contract, in the context of the financial crisis not far away from us, studyingthe mechanism of corporate governance influence on the bank loan contract is apractical problem for the commercial banks and the listed companies.This paper takes the companies listed in Shanghai and Shenzhen stock marketduring2007-2009as samples which meet the conditions，to find out the relationshipbetween the corporate governance and the availability of credit financing. Thecorporate governance is complex mechanism, we cannot only use one or some simplevariables to replace the condition of the corporate governance. In this paper, westructure a comprehensive index GI through the method called PCA to measure thecondition of the corporate governance. And then we use this index to study therelationship between the corporate governance and the loan size and the points ofcrediting financing.The results of the study show us that, the condition of the corporate governanceand the ability of getting the bank loaning have a positive correlation. It reflects in thefollowing aspects: firstly, the better of the condition of corporate governance, thelarger size the companies get bank loans; secondly, the better of the condition of corporate governance, the higher comprehensive point of loan. This paper not onlyriches the theoretical content on the study about bank loaning, but also reveals that thecondition of corporate governance is an important factor affecting financing. Finally,this paper has important practical significance, because it provides new way to solvethe financing constrains.