Performance Competition, Over Investment Of Local State-owned Enterprises And Loan Supporting Of City Commercial Bank

Economy in China is undergoing rapid growth for nearly30years since the reformand opening up. It is known as "growth miracle" worldwide. This miracle occurs becauseof local administrative officials’ race:"the government behavior, economic growth andthe cadre selection". City commercial bank is a relatively special group. On one hand, itpromotes local economic development and bank competition; provide finance support forlocal enterprises. On the other hand, Banks behavior will be affected by governmentbecause of its natural connection with local governments.Investment is one of the troikas of economic growth. The correlation coefficientbetween China’s GDP and investment is up to0.997in99%confidence interval. However,investment efficiency is not necessarily high.This paper starts at the political background of the macro reasons, reviews aspects ofdomestic and foreign literature: the level of performance competition, the level ofenterprise over investment behavior, the level of government bank shareholders. Based onthe literature and related theory, we construct the research clue: Chinese characteristiccadre policy, this policy influence the government behavior, government behaviorinfluence local state-owned enterprises investment, city commercial bank provide capitalfor local state-owned enterprises. In the empirical part, this paper use relevant data ofA-share listed companies during the period2002-2012, using descriptive statistics,correlation analysis, and linear regression to analyze. Then we reach the conclusion：whenthe increasing of GDP belongs to the front or back group, the bigger is the competitivepressure, and the greater the over-investment in local state-owned enterprises. Local citycommercial Banks provide credit support for the local enterprises. When promotion hasbecome a foregone conclusion, officials want transit smoothly, and their intervention onstate-owned enterprises could be less, positive impact on the local over-investment will beweakened.Finally, on the basis of empirical research, we puts forward Suggestions andconclude limitations of our paper.