A Study On Loan Discrimination Between State-owned Enterprises And Private Enterprises In Food And Beverage Industries

Although small and medium-sized enterprises, especially private firms, play crucialroles in society and national economy development, they are in the situation of highposition but low potency when obtaining debt finance from commercial banks. Thedifferences considering debt between State-owned enterprises and private enterprises fallinto two parts. First, the different endowments between the two types of firms lead to thedifferent policy of loans, which is a reasonable difference. Second, the special relationshipbetween governments and state-owned enterprises and the interventions usuallybenefiting SOEs cause the unfair policy of loans that the non-state owned firms haveconfronted, which is a so-called credit discrimination. It would be helpful when we findthe relative number of the endowment differences and credit discrimination in creditdifferences, which may facilitate us to understand the core cause of loan differences.Furthermore, we could get inspiration to deeply reform the commercial band system.Reviewing the literature about loan credit, I find most of authors do not clearlydistinguish the difference between endowment difference and loan discrimination whendoing econometric analysis, so the results they concludes are not sound. Admittedly, a fewauthors realize this fatal problem and then differentiate the endowment difference andload discrimination causing by governments, however, these authors that use the datafrom public companies may ignore that most public companies are high-quality, so, itmay not be well representative of the overall companies in china. What’s more important,a large amount of those private companies have political connections with governmentsand act as a contributing factor of getting more loads from banks, then may undermine thebelievability of conclusion. Considering the above problem, I decide to use the data ofChinese industrial firms concerning food and beverage industries that most of firm of therealms have little political connections in2007, then take advantage of the method ofBlinder-Oaxaca decomposition for linear regression models to analyze the explained part by group differences in endowments, and a residual part that cannot be accounted for bysuch differences.The empirical results show that, comparing with state owned firms, private firms infood and beverage industries usually have less and shorter-term loans, and have to face ahigher lending rate. And A large part of those cannot be well explained by the differentendowments, meaning that non-stated own firms oftentimes suffer from unfairly policy ofloan. In short, from this paper, I offer a helpful angle to understand the creditdiscrimination that private firms have to face.