Current Assets And The Allocation Efficiency Of Credit Resources

Small and medium-sized enterprises which are the core of non-state sectors of the economy play an important role in the development of the economy in our country. However, there has been a credit constraint and the financial distress at the micro credit market. Academia generally believes that the bank credits of the formal financial system are allocated too much to the state-owned enterprises and it leads to the low efficiency of capital allocation. And offering more bank credits to non-state enterprises can improve the efficiency of allocation of bank credit resources. But how to reach the goal? Scholars have not given detailed answers. In this paper, we introduce the differentiated concepts of net provider and net gainer of trade credit to try to research that field.Basing on the data of non-state-owned listed firms from SME board in China from 2007-2009, we put forward the differentiated concepts of net provider and net gainer of trade credit to test the impact of current assets on the trade credit provided by enterprises, and test the traditional reallocation theory of trade credit. We find that (1) The bank credits that firms received are irrelevant to the trade credit provided, which means there is no obvious reallocation effect of trade credit. (2)The firms in higher level of current assets can provide more trade credit, which means there is’liquidity’allocation effect; comparing with the firms which are the net gainers of trade credit, the firms which are the net providers of trade credit are in much more higher level of current assets and get more obvious’liquidity’allocation function. Based on the analysis above, this paper put forward a hypothesis of’liquidity’allocation of trade credit.These results imply that, for the non-state-owned listed firms from SME board in China, if the banking system is able to appropriately increase the allocation of credit resources to the firms which are in high level of current assets, especially to the firms which are the net providers of trade credit and in high level of current assets, it will improve allocation efficiency of credit resources from banking system and push the financial resources to support the economy more effectively.The contribution of this paper lies in:(1) As to how to increase the proportion of bank credit resources to non-state economy, the conclusion of this paper has made a certain answer to it. (2) We put forward the differentiated concepts of net provider and net gainer of trade credit to widen the perspective of theoretical research. (3) Basing on the data of non-state-owned listed firms from SME board in China, we test the traditional reallocation theory of trade credit and put forward a hypothesis of ’liquidity’ allocation of trade credit.(4) The research conclusion can also contribute to the understanding of the present situation of our country.