Bank Association, Information Disclosure Quality And Credit Financing Constraints

At present, China’s economy is undergoing a period of transition, privateenterprises have made important contributions to the development of the economies intransition, however, the development of private enterprises are also facing manyproblems, the important bottleneck restricting the development of private enterprisesis the difficulty of finance. Since most of China’s private enterprises are SMEs, lesscan meet the conditions of equity financing, therefore, debt financing is still the mainfinancing channels for private enterprises. Specifically on the financial markets ofChina, the credit financing is still a major source of funding for debt financing, it canbe said, the financing predicament which private enterprises are facing actual creditfinancing predicament. In addition, banks discriminate against private enterprises alsoexacerbated its dilemma of the financing. Even so, private enterprises still achieved adevelopment, improve the status of our economy, so, this paper starts with bankingconnection and the quality of information disclosure trying to study their impact onprivate enterprises credit financing constraints, as well as private enterprises is howto overcome financing difficulties.The paper selects private enterprises which are A Shares listed on the main boardand the small plates of the Shenzhen Stock Exchange as the research object, explorethe bank connection and quality of information disclosure how to impact on the creditfinancing constraints of private enterprises. Firstly, analyze changes in the quality ofinformation disclosure how to affect credit financing constraints of private enterprise.Secondly, consider a bank connection how to affect the credit financing constraints ofprivate enterprise. Finally, according to the high and low of the quality of informationdisclosure put the samples into two groups to compare that in which group bankconnections have a stronger impact on credit facilities. By regression analysis, we candraw the following conclusions: most Private Listed Companies in China have creditfinancing constraints. Changes in the quality of information disclosure can reduce thecredit financing constraints faced by private enterprises. Companies choose a manwho has banking background or personnel working in the bank as the bank associatedcompany executives, also reduce the corporate credit financing constraints. Groupedregression results show that compare to the higher quality of information disclosure group, the bank connection mitigate credit financing constraints more in the lowerquality of information disclosure group.Although this paper have researched financing constraints from the formal andinformal point of view, the conclusion shows that both of them can alleviate the plightof credit financing of private enterprises, the purpose of this study is not to encourageenterprises to obtain bank loans by keeping a good relationship with the bank, it justrevealed a status quo that currently exist in China. Even though the bank connectioncan mitigate the financing constraints of private enterprises, but it is only a transitionof the early economic development, along with the continuous development andimprovement of China’s economic, legal, financial and other institutions, the role ofsuch informal system will be gradually weakened, however, the quality of informationdisclosure will plays a dominant role. Therefore, enterprises should proceed on theirown efforts to improve the quality of information disclosure, only the improvement ofall aspects of their enterprises can increase the bank’s trust and ease the pressure oncorporate finance.