The Influence Of The Bank Loan Supply On Corporate Capital Structure

This article will study the effect of bank loan contraction on corporate capital structure.Bank loans are one of the main sources of company's external funding.The impact of bank loan supply will affect the company's financing decisions,which is proportional to the company's dependence on banks.Large state-owned enterprises in China are highly dependent on banks,making Chinese companies a typical example to study the impact of bank loan supply on corporate capital structure for scholars at home and abroad.China's market is still in the process of improvement.The scale and efficiency of financial markets have not yet reached the level of mature markets in developed countries.Commercial bank loans are the main source of external funds for Chinese companies.Unlike foreign mature financial markets,China's enterprises have relatively limited alternative financing chooses in addition to bank loans.In the developed countries of the United States and Europe,after a long period of development,a relatively mature financial market has been established.In addition to the indirect financing system based on well-funded commercial banks,a relatively developed direct financing system has also been established,with various financing channels,including equity financing and bond financing.When the amount of commercial bank credit is reduced,the direct financing market can provide most companies with alternative financing chooses.The existence of alternative financing channels mitigates the impact of bank loan supply shocks on corporate financing decisions.However,in China,there is still no well-established financial market,indirect financing led by commercial banks is the main form of financing in China's financial market.Therefore,the impact of China's bank loans on corporate capital structure is relatively obvious.From the corporate level,China's state-owned enterprises are large-scale and have steady operation,holding a large amount of funds,the corporate security is relatively high,so they are easily favored by banks.At the same time,China's commercial banks are dominated by the five state-owned commercial banks,the country's shareholding ratio is relatively high,moreover,the bank's chairman and general manager and some senior executives are directly appointed by the central government,the development and operation of commercial banks are highly valued by the state.The common state-owned assets background of commercial banks and state-owned enterprises has caused benefit relationship between banks and state-owned enterprises,which also makes banks more inclined to grant loans to large state-owned enterprises,leading to a high degree of dependence of large state-owned enterprises on bank loans.When the supply of bank loans increases,large state-owned enterprises will increase more borrowings,and thus increase the leverage ratio;conversely,when the supply of bank loans decreases,large state-owned enterprises will correspondingly reduce more borrowings and reduce the leverage ratio.The bank's credit discrimination has made it difficult for small private enterprises to obtain sufficient loans to enhance corporate profits and this affects the development of small private enterprises.Commercial banks usually choose to lend to large state-owned enterprises with steady operations because of the security and profitability of loan funds.In contrast,small private companies,due to the existence of more risks,have caused banks to charge them higher interest rates or refuse to provide loans to them.In recent years,the state has issued a series of policies to support the development of small enterprises,The People's Bank of China has guided financial institutions to provide loans to small and medium-sized enterprises to support these enterprises using external funds to enhance corporate profits.This article will prove that large state-owned enterprises will reduce the loan and leverage ratio in the case of bank loan supply contraction because they are highly dependent on bank loans;on the other hand,small private enterprises are limited in their access to bank loans,therefore,they are not sensitive to the impact of bank loan supply.In recent years,the state has guided financial institutions to grant loans to small and medium-sized enterprises,this,to some extent,help small and medium enterprises to obtain loans,the effect of the policy remains to be explored in the future.