Study About The Relationship Between Financial Development And Enterprise Working Capital Policy

Working capital management is an important part of enterprise financial management, which will be under the influences of enterprise internal microcosmic factors, such as, scale, profitability, growth, debt ratio and so on. In addition, working capital management may respond to the change of the external environment. Many studies shows that the macroeconomic factors, such as inflation, interest rates, GDP, economic cycle, will affect some individual projects of working capital, such as, inventory, cash holdings, commercial credit and so on. As the basic environment of enterprise financial decision, the degree of financial liberalization will inevitably impact on the enterprise financing cost, investment decision, may further affect the working capital management of enterprises. Many studies found that, through easing financing constraints of enterprises, financial development promotes enterprises and even the whole macro economy to develop, and financial constraint is the essential reason of liquidity management of enterprises. The degree of financing constraints will affect the investment and financing decision, and affect its working capital policy. Therefore, this paper takes the financial constraints for the bridge, and puts the macro financial development variable into the model of enterprise working capital policy’s influence factors to investigate whether the degree of financial liberalization will influence on the enterprise working capital policy, and whether there are differences about the impact in enterprises with different property rights and in different economic cycles, which will link the macro economy with the development of micro enterprises. This will help us to understand the process of liberalization and the effect of financial development on micro enterprise, also be helpful to find the change form and law of enterprise financial policy in the process of liberalization, so as to better understand the mechanism of macroscopical economic policy environment for micro enterprises.This paper establishes the linear regression analysis model, and uses records from 2003 to 2011 of firms from China stock market all A shares as the research sample, to study the correlations between working capital management policy and financial development by the linear regression analysis method. Data selection bases on the two factors: first of all, select all the A shares as the sample, because there is a big gap between the level of financial development in different area of China, therefore the enterprise data from various regions of the country provides a good background for our research; secondly, 2003-2011 covers the uplink period and the adjustment period of economic cycle, which will make the results more convincing. However,for the gap of the data of financial development level, we can’t further expand the sample.Through the empirical analysis I find that along with improving of the financial development level, the enterprise financial constraints have eased, and the level of networking capital has increased, that is to say, working capital policy tends to be loose, which further illustrates that the macroeconomic environment will influence the enterprise microcosmic behavior. Financial development is affecting enterprise investment and financing decisions through easing enterprise financing constraints to promote economic growth. The article further investigates whether there are differences about the impact of financial development on the enterprise working capital policy for the enterprises with different property rights, or in different economic cycles. The results show that the above effect is more obvious for private enterprises, and more significantly in economic adjustment period.