The Impact Of Property Law On Firms' Debt Financing

China's market economy construction has made great achievements since the reform,but due to the lag of financial development and imperfect legal system,China's economic development is still limited.For a long time,the academic circle has paid close attention to the relationship between the reform of legal system and the development of economy and finance.Classic research shows that when the capital market is fully effective,enterprises usually prefer to choose debt financing from two aspects of financing cost and financing risk.However,from the perspective of China's national conditions,mortgage-backed financing is still one of the main sources for enterprises to obtain funds.However,when the capital market is not fully effective,due to the problem of information asymmetry in the market,and the contracts concluded by both creditors and debtors are often not complete,the fund provider often requires the borrower to provide necessary risk mitigation measures,at this time,the borrower's financing ability mainly depends on the collateral.Mortgage-backed financing in China has always been dominated by real estate,with a single type of secured assets,which severely constrains the scale of debt financing of enterprises.As an important part of the legal system,China promulgated the property law in 2007.Whether the reform of the property law and other legal systems can effectively improve the financing situation of enterprises also needs to be answered.However,due to the limitations of data availability,research methods and perspectives,the academic research results on this issue have not been unified,and its mechanism is also lack of a more systematic understanding.In order to systematically investigate the effect of debt financing caused by the reform of the security real right system at the enterprise level,this paper reviews the latest research progress from two aspects: the impact of the legal system of creditor's rights on debt financing and the research based on the natural experiment of legal reform.Then,combined with the background of China's new transitional economic system,this paper analyzes the reform process and influence of China's security interest system,and makes a comparative analysis between the property law and the previous law from the following two aspects.Based on the data of private listed companies,this paper divides the samples intoexperimental group and control group according to the difference of the real right law in the dimension of operational risk.First,the impact of legal reform on corporate liabilities is visually observed through the time trend chart of liabilities,and then a double difference model is constructed.This paper designs an empirical research program to further investigate the impact of the reform of the security real right system on corporate debt financing.Specifically,empirical research is carried out from three aspects: liquidity liabilities,non-current liabilities and total liabilities.Using the difference-in-difference model,this paper examines how the reform of the security real right system,marked by the promulgation of the Property Law,affects the debt financing of enterprises.Empirical results show that,compared with enterprises with lower operational risk,the liquidity liabilities,non-current liabilities and total liabilities of enterprises with higher operational risk increase faster after the promulgation of Property Law.It shows that after the reform of the security real right system,compared with the financial institutions such as commercial banks,the real enterprises are more sensitive to the changes of the legal reform.In order to test the robustness of the results,two methods are adopted to test the robustness.Firstly,different methods are used to construct the experimental group and the control group;secondly,the method of changing the time point of the event and narrowing the time window is used to test whether the previous results may be caused by other events,including the test before the reform of the security real right system and the test after the reform of the security real right system.Multidimensional test shows that the result of debt financing increase caused by the reform of security real right system is very stable.Finally,this paper summarizes the main research conclusions and puts forward relevant policy recommendations.Based on the empirical study of China's emerging transition economy,this paper identifies the causal relationship between macro-level legal changes and micro-level corporate financing decisions,clarifies the financial effects and mechanism of the reform of the security real right system.Effective promotion of financial development has important reference significance.