Bank Connection,Macroeconomic Environment And Behaviors Of Corporate Investment And Financing

Relationship mechanism plays an important role in business development in China,for China's financial market is not perfect.To get scarce credit resources available,enterprises have established close contact with banks.How bank connection influences on enterprises' financial management policies is a notable topic.Based on data of Chinese A-share non-financial companies listed on the main board from 2008 to 2014,this paper researched how different forms of bank connection impacts on enterprises' investment and financing behaviors,combined with macroeconomic environment.Questions are as followed: How bank connection affects different term of bank loans of enterprises? Does it affect enterprises' tendency to cash dividend payment? Is there any difference between bank associated and non-associated enterprises in the level of entity investment? Does bank connection influence the probability of entrust finance? Moreover,do effects of bank connection change with different macroeconomic background? This paper found some results.Firstly,bank associated enterprises,except bank holding enterprises,have higher level of bank loans.Enterprises which own executives of bank background,or hold shares of bank directly or indirectly have much higher level of short term loans,total loans and new added loans.What's more,they can ease negative effects of tight monetary policy on these three forms of loans.However,bank shares decrease bank loans and can't reduce negative effects of tight monetary policy.Secondly,different forms of bank connection have different effects on enterprises' willingness to pay cash dividends.Enterprises with bank background executives or direct shareholding of banks have higher willingness to pay cash dividends,and indirect shareholding of banks does not affect company's willingness to pay cash dividends,and companies whose shares held by banks are unwillingness to pay cash dividends.Economic downturn reduced enterprises' willingness to pay cash dividends,and bank shareholders will exacerbate this trend,while executives with bank background reduced this negative effect significantly.Thirdly,all forms of bank connection decrease companies' entity investment expenditure in varying degrees.Companies cut investment expenditure in the period of economic downturn,and bank connection will enhance this action.Finally,enterprises with bank association are more likely to be engaged in entrust finance,for it promotes business performance.When macroeconomic environment is poor,companies prefer to entrust finance rather than entity investment.Bank association strengthens role of economic downturn on entrust financing.Conclusions of this paper not only enriched related literature of bank association and corporate financial management,but also provided implications for corporate governance,credit management of banks and building financial institution.