The Impact Of Financial Loans On Regional Capital Misallocation

This dissertation addresses the impact of the loan scale of financial institutions on regional capital mismatch by referring to the China's provincial panel data from 1995 to 2015.Based on related literatures of financial development and capital mismatch,this dissertation makes a research into the relationship between the loan scale of financial institutions and the mismatch of regional capital.3 new points are highlighted: First,it conducts a study of regional capital mismatch from the perspective of financial market which is seldom found in other relevant literatures on capital mismatch.Therefore this research can supplement and improve the existing findings on such topic.Second,the study of the relationship between loan scale of financial institutions and the mismatch of regional capital can help to understand the complex relationship between financial development and economic growth.Third,it is found that there is a "U" type nonlinear relationship between the loan scale of financial institutions and the mismatch of regional capital,rather than a simple monotone linear relationship,which clearly shows the existence of both positive and negative effects.I argue that moderate control shall be applied to the loan scale of financial institutions and prevention of excessive lending is needed in order to reduce the mismatch level of regional capital.This contributes the policy significance and theoretical value of this article.In addition,this dissertation shows its practical meaning by studying the mismatch of regional capital from the perspective of the loan scale of financial institutions,which is helpful to evaluate the function of current financial intermediary market in serving the real economy,as well as to contribute to the exploration on the relationship between financial development and real economy,and to provide policy support and policy advice for the regulation and control of national macro-loan policy.Based on China's provincial panel data from 1995 to 2015,an econometric model is constructed and analyzed by establishing a systematic GMM empirical model.It shows that:(1)after 2008,the loan scale of financial institutions intensifies the mismatch level of regional capital;(2)By adding quadratic item to the model,it is found that the loan scale of financial institutions and the regional capital mismatch shows a U-shaped relationship,which indicates that the loans from financial institutions have a dual effect of “Intensification effects” and“Improvement effects” on regional capital mismatches.In other words,when the loan size of regional financial institutions falls within a relatively lower range,the “Improvement effects”work,which may lead to the result of the situation improvement of the regional capitalmismatch with the increase of loan size.However,when the loan size of financial institutions exceeds a certain critical point,the continued increase in the loan size will aggravate the regional capital mismatches,and it is considered as “Intensification effects”.In order to further verify the U-shaped relationship of the loan scale of financial institutions and the regional capital mismatch,the threshold empirical analysis is taken.The analysis result shows that the threshold effect of loan size for financial institutions is evident in the relationship between loan size of financial institutions and capital mismatch.When the loan size of financial institutions is in a lower range,there is a negative correlation between the loan size and capital mismatches.On the contrary,when the loan size of financial institutions is in a higher range when exceeds a certain critical,there is the positive correlation between the loan size of and capital mismatches.This fully demonstrates that the U-shaped relationship between the loan scale of the financial institution and the mismatch of regional capital is remarkably valid.Therefore,a viewpoint conclusion is raised: when the loan size falls within a reasonable size range,financial loan can provide financial support for the real economy development,and to some extent,it stimulates regional economic growth,as well as to improve the efficiency of capital allocation.When the loan size gets too large,it makes a negative effect on the regional capital mismatch which may cause a drag on the economic growth.Of course,the financing of Chinese companies relies mainly on financial loans.There is no doubt that financial loans play an important role in the steady and rapid development of the macro economy during the economic transition period.However excessive lending will deteriorate the efficiency of capital allocation.