A Study On Influence Mechanism Of Financial Development On Entrepreneurship In China

Financial development only contributes to the economic development when it promotes the entrepreneurship.In the current environment of encouraging entrepreneurship and innovation,to figure out how the financial development effects the entrepreneurship is quite essential.Shumpeter pointed out that the financial system had to provide the services due to the entrepreneurship.A developed financial system should promote the efficiency of capital allocation and free the restrain of financing to create a healthy innovation environment.To do that,we must figure out the relationship between financial development and entrepreneurship.Tons of studies have been made though,but whether the financial development could improve the entrepreneurship through promoting the efficiency of capital allocation and freeing the restrain of financing or not,due to the imbalance of our financial development,that remains a question.For the reasons all above,this paper discuss the mechanism on how financial development promote the entrepreneurship in details.This paper built a financial development system to calculate the developing level of all the areas after we did all the research on the current theory.We use the self-employment rate to represent the entrepreneurship index and use the number of patents to represent the innovation index.In the mean time,we calculate the capital allocation level and the financing restrain level,so that we could use them to explain the mechanism.Based on massive studies and empirical analysis,we studied the data of sample all across the 31 provinces during 2005 to 2016 and found that:firstly,the financial development could promote the entrepreneurship;secondly,the financial development increases the efficiency of capital allocation while the efficiency of capital allocation failed to promote the entrepreneurship;thirdly,the financial development could effectively decrease the financing restrain level and in that way it effectively promoted the entrepreneurship;finally,the financial development promoted the entrepreneurship through decreasing the financing restrain level,the efficiency of capital allocation didn't do much work in this mechanism.In the end,we gave our suggestions based on the research we applied above in order to make the financial system work better in promoting the entrepreneurship and,also,to help the further research.