Study On The Impact Of Financing Constrains On Capital Misallocation Under Financial Repression

China’s economic development pattern is shifting to intensive growth ofqualityand efficiency from extensive growth of scale and speed, so to improve theefficiency of resource allocation becomes endogenous requirement of economicdevelopment. As capital misallocationwill cause impairment of productivity,eliminating capital misallocationhas important significance for China’s economictransformation. Under the institutional background of long-term financial repression,due to interest rate control and credit rationing, enterprises are facing differencefinancing constraints. Financing constraints affect the investment behavior ofenterprises, thereby affect the allocation of capital. Therefore, researchthe impact offinancing constraints on capital misallocationunder the background offinancialrepression contributes to explore effective ways to eliminate capital misallocation, andenhance the efficiency of capital allocation.Based on the achievement of literature, combined with resource allocation theory,financial repression theory, financial function theory and corporate finance theory, thisarticle analyzed theoretically the formation mechanism of capital misallocation, andthe affect channel for capital misallocation form financing constraints. Based on thetheoretical analysis and the industrial enterprises data in China from2001to2009,this article measured and analyzed capital misallocation of micro-level firstly, thenexamined the impact on capital misallocation form financing constraints by SystemGMM method, while compare and analysis the differences between regressioncoefficients from the perspectives of corporate ownership, regional financialdevelopment level andthe degree of industry monopoly.Through theoretical analysis and empirical test, this article finds that:(1)corporate financing constraints effect capital misallocation significantly, aggravationcash flow financing constraints and bank credit financing constraints will reduceenterprises’ actual proportion of capital allocation, business credit will occupiedenterprise’s funds then reduce capital allocation;(2) between enterprises of differentownership financing constraints effect capital misallocationsignificantly differently, the impact on state-owned enterprises weaker than other enterprises obviously;(3) thedifference of financial development level and industry monopolydegree will alsoaffect the impact of financing constraints on capital misallocation.These results illustrated the impact of financing constraints on capitalmisallocation, and theirdifferencesunder different economic conditions. Accordinglythis paper raised recommendations to eliminate China’s capital misallocation andimprove the efficiency of capital allocation, which is of great significance to China’seconomic upgrading and sustainable development. However, there are still manydeficiencies in this article, so writer also raised prospects for future research at thefinal part.