An Empirical Study On Relationship Between Financing Constraints And Production Efficiency

It is an urgent and much-needed problem to solve that is to improve e Enterprise’s capacity of research and development, innovation as well as production efficiency on the way of economic restructuring and upgrading. Issues surrounds the different kinds of measure methods of financing constraints and investment efficiency had been hotly disputed in the academic circles these days. However, scholars rarely focus on whether financial constraints could accelerate the productivity, by the way of optimizing the allocation of resources. Therefore, this paper attempts to figure out whether financing constraints inhibits or promotes production efficiency in domestic enterprises.Based on the analysis of the existing literature, I had measured financial constraints index and total factor productivity, which is proxies of production efficiency. Then I derived the dynamic relation between the two after analyzing the theoretical models, which showed that there is a U-shaped or positive correlation between them. According to this correlation, I put forward the hypothesis and model. To check up the relationship between financial constraints and production efficiency, I choose companies as my samples, listed in the Shanghai and Shenzhen stock exchanges during the period from 2001 to 2011. Then I divided all the samples into two groups according to the moment financial crisis took place, and used the total and two sub samples to regress.The outcomes show that,(1) No matter it is in the total sample or the sub-sample regressions, there is no U-shaped relationship but a positive correlation between them. It tells us that financing constraints has positive impact on production efficiency. It is probably because enterprises those are difficult to finance, pay more attention to capacity of innovation, and then improve their production efficiency. Therefore, government should not simply think about how to reduce the degree of financing constraints, but develop policies in favor of enterprises who are constraint seriously on financing as well as raise the financing threshold of enterprises who have abundant idle capital, when making macroeconomic policies.(2) Enterprises scale and profitability are significantly negatively correlated with production efficiency for total sample. This suggests there are ‘inefficiency of scale’, which reveals large-scale and highly profitable firms have lower production efficiency. It is urgent to improve those firms’ sense of competition, to optimize their management mechanism, to improve the existing relations of production and production methods of them.(3)In the regression of sample after financial crisis, enterprises scale is not relate to the production efficiency, but profitability is correlated it significantly and positively, which is different from the results of the total sample. It means that the financial turmoil has great impact on the market. To improve and develop their production, Enterprises have to maximize the corporate’ value, and ultimately got a significant positive correlation between the profitability and production efficiency. It tells us it is necessary to build up market competition mechanism, meanwhile, to encourage their researches and innovation projects, as well as to adjust the degree of financing constraint properly, then the production efficiency would be improved, finally.