The Impact Of Monetary Policy On The Listed Companies’ Financial Ability

With the spread of the international financial crisis and the European debt crisis, the state macro control is strengthening, and monetary policy is adjusted several times:monetary policy changed from "prudent" to "moderately tight","tight", then from "moderately loose" to "prudent" from2007to2012. The monetary policy tools adjusted frequently (adjusted interest rates for18times, the deposit reserve for35times). Whether the series of monetary policy adjustment affected the company’s financial ability or not? What’s the relationship of the company’s financial ability and monetary policy? Under this background, it has the very strong practical significance in making monetary policy and financial strategy to study on the effect of monetary policy on listed Companies’ financial ability.In the research field of accounting and finance, empirical study of accounting gradually occupied the mainstream research status from the Ball and Brown (1968).Research on accounting and capital market has increased year by year and become the international mainstream academic field. But recent research focused on company behavior (such as investment behavior, financing behavior) and output (e.g., capital structure, profitability, growth) and so on, which relatively limited the study. Jiang Guohua (2011) points out that the study can strengthen the relationship between macroeconomic policies and the company’s output. Since then, research on the relationship of macroeconomic policy and company’s output become a new field of study, and the research findings become rich. In this paper, studying the effect of monetary policy on the listed companies’financial ability is also an attempt in this field.This paper used "Financial Index of Listed Companies in china", the result of the Natural Science Fund project "the construction theory, model and application of Financial Index of Listed Companies in china", to study the problem. The Financial index theory was proposed by Zhao Dewu in2000, which is based on prosperity theory, financial theory and financial early-warning theory. After studying for many years, the financial index system finally came to fruition, which was a dynamic and comprehensive index system. The theory points out that we can build the financial index system based on the prosperity theory,because the enterprise also has the financial cycle as the macro economy from a micro perspective; And it is the inevitable development of the financial analysis theory when this theory developed to the financial early-warning theory which uses a more comprehensive indicators to affect objectively and monitor dynamically the listed companies’ financial situation, to analyze the past and present financial situation and the prosperity of China’s securities market, and to predict the process of financial and economic operation. Financial Index of Listed Companies in china chose the Chinese listed Companies as the research object, and integrated refined the financial information of the listed Companies through the proper financial index choosing and scientific empowerment, ultimately to get the dynamic index. The construction of the index provides a practical tool for studying the relationship between the company’s financial ability and macroeconomic policy. The company’s financial ability referred in this paper is defined as Jing Xin et al’s definition. As the related research in Financial Index of Listed Companies in china, the listed companies’financial ability is defined as five abilities:the debt paying ability, growth ability, cash flow capacity, profitability and operating capacity. So Financial Index of Listed Companies in china can be used as substitute variables of listed Companies’financial ability.Based on the theory of monetary policy transmission mechanism and financial index theory, this paper in-depth analyzed the impact mechanism of monetary policy to the listed companies’financial ability, which was proved by empirical tests. The main contents are as follows:The theory of monetary policy transmission mechanism mainly studies how the monetary policy transmits to the real economy and ultimately affects the social total output. The research on the monetary policy channel is the main content. The monetary policy channel is mainly divided into the money channel and credit channel. The monetary channel stated the path how the interest rate as the key variables affects the real economy, the Keynes doctrine and the currency doctrine as the main representative. During the twentieth Century recession, people found that it cannot only to explain the great changes in economy from the monetary channel. This experience led another important monetary policy channel, the credit channel, to appear. The credit channel is raised by the credit availability theory and asymmetric information theory. The theory points out that because of the limited credit resource and asymmetric information, there will be differences between external financing and internal financing cost which is called the external finance premium. The credit channel theory also believe that the company’s balance sheet will affect their credit availability, and financial success will further affect the investment behavior, and reducing investment will weaken the company’s balance sheet in the future. It finally has a great influence on the total economic output. This mechanism is called "the financial accelerator mechanism".After analyzing the effect of each channels of monetary policy on the real economy, we summarized that the monetary policy impact the company mainly through two ways:one directly changes the company’s cost of borrowing and asset prices, through the money supply and interest rate changes; the other one changes the company’s external financing constraints, through the money supply and interest rate and credit conditions. The two approaches will affect the company’s financing and investment behavior, resulted in the company’s financial ability to change. After the analysis of monetary policy effecting on the listed Companies’ financial ability, we also analyzed the subject through the perspective of specific finance indicators, which explained that monetary policy has different influences on the five financial abilities.Finally, this paper selects the Monetary Policy Perception Index as a proxy for monetary policy issued by people’s Bank and Financial Index of Listed Companies in china as a proxy of the listed Companies’financial ability, choosing the year2007as the beginning time when changed the accounting standard, using time series study method such as the unit root test, cointegration test, VAR model construction, VAR impulse response functions and variance decomposition to analyze the impact of monetary policy on the listed Companies’financial ability and obtained the following conclusions:First:adjustment of monetary policy will change company’s financial ability. Second:in the short term, the adjustment of monetary policy has a certain reverse effect on companies’comprehensive financial ability, but has a little positive effect in the long term.Third:the impacts of monetary policy on the company’s each financial ability are different, but all have the reverse effects in the short term. Because the main influencing factors of the company’s various financial abilities are different, the effects of monetary policy on each kind of financial ability are different too.Forth:in the long run, the monetary policy has relatively stronger explanatory power on the company’s debt paying ability, operating ability, profitability, less on cash flow capacity, least on growth ability.According to the research results, this paper puts forward several policy suggestions:first, in the formulation of monetary policy, taking into account the impact on the company’s financial ability; second, in the future, it can be matched with other macroeconomic policies to reduce the negative effect on the company’s financial ability companies in the development of the financial strategy and policy, should pay close attention to the adjustment of monetary policy, adjust the financial strategy and policy ahead of time or timely to deal with the impact on each kind of financial ability attention; third, focus on key financial indicators according to the influence degree of monetary policy on financial ability; forth, formulate financial plan according to the reaction cycle and characteristics of the financial ability to monetary policy’s adjustment.This paper has the following innovations:First, the uniqueness of the research proposition. The topic how monetary policy affects the company’s financial ability has not occurred in the existing research literature. This paper studied the impact of macro monetary policy on the listed companies’ financial ability, so as to reveal changing characteristics and rules of the company’s financial ability. This provides a new and unique research field for studying the existing financial theory.Second, innovative research perspective. Financial Index of Listed Companies in china is recently proposed in the academic field as a reflection of the company’s financial ability by dynamic, comprehensive index system, which has important application value for revealing the listed companies’ financial ability. We used Financial Index of Listed Companies in china as an alternative variable of the financial ability, and analyses the influence of macro monetary policy on the listed companies’ financial ability. This new perspective provides a new perspective and analytic framework not only for the study but also for the follow-up study.Third, new research methods. The existing literature about the impact of monetary policy on the company’s behavior mainly based on the accumulation of data (such as GDP), or based on the micro data through panel data to discuss the mechanism. This paper will first process micro data to form macro financial index system, and then do the research through the method of macro economy. No doubt it is a new attempt.