Commercial Credit And Bank Credit: Complementary Or Alternative?

The developing countries which are in the transition economies period, thehigh-speed economic development is often in stark contrast with the inefficient financialefficiency and the backwardness of financial system. Scholars are exploring the mysteryof the economic development of developing countries, the widespread use ofcommercial credit becoming the focus of their concern. Empirical studies of Woodruff,Fisman and Love have shown that, commercial credit is the main driving force forenterprise development in unsound financial markets in developing countries andcountries with economies in transition. China has been showing rapid growth after theeconomic reform and opening up, whereas the financial development is seriouslylagging behind, our indirect financing from the bank-oriented financial system, whichgreatly limits the financing channels for enterprises. Commercial credit becomes analternative source to a large number of enterprises. Alternative and complementaryrelationship between commercial credit and formal financing has been a controversialtopic in academia. In this context, this paper will deeply discuss the relationshipbetween the two types of credit and its impact factors based on the Chinese market.This article studies the relationship between commercial credit and bank creditand its influencing factors with listed companies in China, through taking advantage ofthe listed companies in Shanghai and Shenzhen1997-2009years panel sample, usingthe company ’s internal and external factors as control variables, and solving thevariables endogeneity problem with instrumental variable two-stage least squaresmethod. The results show that: The supply of commercial credit has significantcomplementary relationship with bank credit, and complementary effect isapproximately5%. And the acquisition of commercial credit has significant alternativerelationship with bank credit, the substitution effect is about38%. Complementaryefficiency of listed companies in commercial credit and bank credit is at a lower levelcompared with the substitution effect. And commercial credit is widely used as a cheapresource by companies.Group the sample by firm size, age, ownership nature, the degree of financialdevelopment, the legal environment, the degree of economic development, opening tothe outside world, government intervention, testing whether there are differences in therelationship commercial credit and bank credit under different environmental. Grouping results still prove the existence of complementary and alternative relationship betweencommercial credit and bank credit. But in different groups, the strength degree of therelationship changes. It is found that the role of such redistribution channels becomeincreasingly obvious, the lower the level of development of the external institutionalenvironment. And the capacity of bank credit redistribution of small-scale enterprises aswell as state-owned enterprises, are stronger than the big-scale and non-state-ownedenterprises. On the other hand, in the region with well developed external institutionalenvironment, the alternative effect between commercial credit and bank credit issignificantly higher than other regions, with the sound development of the externalfactors, breach costs will rise, the enterprises in these regions can take more advantageof cheap commercial credit financing. Promote the improvement of the externalinstitutional environment will be more conducive to the use of the resources ofcommercial credit, and reduce the transaction costs between enterprises，and ease thefinacing constraints; Our country should also speed up the construction of credit system,on the one hand, it can help to prevent a recurrence of the massive “triangular debts”, onthe other hand it can also contribute to the commercial credit-based trade.