Monetary Policy, Internal Control And The Cost Of Debt Financing

Since the 2007 financial crisis, faced with complex economic environment, the government frequently adjusted monetary policy. Monetary policy experienced a changing process from "tight" to "steady", "moderately tight", then from "tight" to "loose", "steady" from 2006 to 2012, which provides a good environment for the study on macro monetary policy and the behavior of micro enterprises. Most previous research on monetary policy is conducted from a macro perspective, rarely pay attention to microscopic delivery basis. And the efficiency of monetary policy is often influenced by the micro behavior. This article will examine the impact of monetary policy on corporate financing efficiency and the function of internal control on the impact, in order to support the new micro evidence for the micro-transmission mechanism of monetary policy and the role of internal control.Firstly the paper reviews the domestic and foreign research literature related to the topic and analyzes them, combining theoretical and institutional background analysis, puts forward the hypothesis of this paper. This paper selects 2006-2012 A-share listed companies in Shanghai and Shenzhen as samples, examines the research hypotheses by Pearson correlation analysis and further validates the hypotheses by OLS regressions and WLS regression. In addition, the paper groups the samples according the nature of property rights, the external governance environment and analyzes and compares the differences about the effects of internal control between different groups.In the robustness test section, firstly the regression model does not exist multi co-linearity and autocorrelation sequence by doing the VIF test and BG test; secondly corporate governance variables is added to regression model, the results remain unchanged; lastly the results remain steady when do the Tobit regression.The results show:The cost of debt financing increases significantly when monetary policy is to tighten; A high level of internal control can reduce the cost of debt financing, weakening the impact of monetary policy on debt financing costs; Further study, weakening effect of the internal control is more obvious in the non-state-owned enterprises and the enterprises in the area with good external governance environment.Finally, this paper presents research advice based on the conclusions from the national level and the enterprise level. From the aspect of the nation, the government need to consider the difference among different micro entity when formulate monetary policy, which make monetary policy play a more efficient role and promote prosperity of China’s real economy; we also strengthen internal control. In terms of enterprises, they should improve the level of internal control continuously to improve financing efficiency, besides, the conclusion also provide a effective method to enterprises especially the non-state-owned enterprises and the enterprises in the area with good external governance environment to cope with tight monetary policy.