An Empirical Study Of The Effect Of Financial Structure On Firm’s Financing Constraints

Nowadays China is going through a transition period of economic development. SMEs generally face financing constraints. Financing constraints hinder the development of enterprises which are micro part of the economic operation. So financing constraints will eventually affect the operating efficiency of macroeconomic. How to solve the financing constraint problem is becoming general issues that theoretical circles and policy makers concern.The main factors affecting the company financing constraints can be divided into two categories. First is the microeconomic factors that is companies factor. The second is macroeconomic factors that is the financial structure. The innovation of this paper is the introduction of the macro variables which is the financial structure to the financing constraints in the micro problems. First, this paper do some work on the causes of financing constraints, and research on the way how financial structure affect the corporate finance constraints. Then we combined internal and external factors together to analysis corporate financing constraints. This paper also study on some description of the financial structure, we construct two variables that explain the financial structure, in order to attempting to give a comprehensive description of all the information in the financial structure.In empirical research, this paper has selected21countries in the worldwide within10years of manufacturing listed company data, and through the creation of econometric models to examine the firm’s cash-cash flow sensitivity to determine degree of financing constraints. We come to three conclusions:Fist, companies who are facing financing constraint showed a higher cash-cash flow sensitivity, the company with small size and low the interest coverage ratio is vulnerable to facing financing constraints; Second, corporate financing mainly from bank or stock and bonds markets, and a country’s financial structure can be roughly divided into the bank-oriented or market-oriented; Third, financial structure and corporate financing constraints are significantly related, companies are more vulnerable to financing constraints if they are located in the financial system with small-scale and low level of activity.The conclusions of this paper can provide some reference to the development path of China’s financial structure and developing methods and provide advice to policy-makers, from an empirical point of view.