Research On Financial Accelerator Mechanism Based On Double Principal-agent

Since the 1990 s, at the back ground of economic virtualization and financial globalization, the role of financial factors in the macroeconomic fluctuations has become increasingly prominent. Due to the existence of asymmetric information in financial markets, small impact initially will be strengthened and enlarged through the financial market, resulting in drastic fluctuation in macro economy. Taking the asymmetric information between banks and enterprises as an entry point, Bernanke et al.(1989) put the financial frictions into the analysis framework, presented the financial accelerator theory. This theory effectively explained the “small shocks, big fluctuation” problem. In fact the bank is not as perfect as the traditional financial accelerator theory assumptions, the bank itself will be affected by credit constraints. It will also produce the principal-agent problem between banks and families, due to information asymmetry.Based on the principal-agent problems between families and banks, banks and enterprises, we establish a double principal-agent model, in order to analyze the microcosmic mechanism of financial accelerator transmission. Through optimization of the double principal-agent contract, draw the conclusion: the external finance premium of enterprise is not only negatively correlated with net worth of corporate assets, but also negatively correlated with the net assets of bank. Then from a dynamic view, analyze the continuous amplification effect of economic fluctuations by different external shocks, through financial accelerator.This paper makes an empirical research using the financial data of Chinese listed companies from 2003 to 2013. The empirical results indicate that assets-liabilities ratio has a significantly negative influence on business investment; the change of commercial banks’ balance sheet also has remarkable negative changes on business investment. Both the status of corporate balance sheets and commercial banks’ balance sheets will influence the capacity of corporate debt financing. And then affect the behavior of corporate investment. Secondly the change in monetary policy will influence business investment, through change the state of corporate balance sheets.Finally, put forward suggestions in order to alleviate the negative effect of tremendous economic fluctuations caused by the financial accelerator. Suggestions include establishing the credit evaluation and guaranteeing system, and changing the status of China’s financial market.