The Impact Of Financial Development On Capital Allocation Efficiency

The research on the theory of financial development has matured,and the role of financial development in promoting economic growth has been enriched by theoretical and empirical experience.However,there is not much literature on the quality of financial development and economic development.In this paper,the efficiency of capital allocation as an internal factor to measure the quality of economic development,endogenous economic growth theory as the main framework,the theory of additional financial functions as a research paradigm.In addition,starting with the value of the marginal product of capital,we discuss the micro-formation process of misallocation of capital by combining the factors of financial development.It may provide valuable policy suggestions for further financial reforms and reforms in the real economy.In terms of research ideas,on the basis of combing related concepts,this paper defines the efficiency of capital allocation as two dimensions of sensitivity of capital formation and degree of mismatch of capital.Dividing financial development into multiple indicators for total financial output,financial structure(ie the relative size of banks,securities and insurance sectors),and financial efficiency.In content,the paper can be divided into two parts: index calculation and empirical analysis.Using the models of Wurgler(2000),Hsieh and Klenow(2009),this paper estimates the sensitivity of capital formation and the degree of capital mismatch in China.Conducted a comprehensive review of the efficiency of China's capital allocation.The empirical part is based on the region as a basis for the measurement of the capital allocation efficiency and the degree of correlation between the financial development indicators.Indicators measured results show that the sensitivity of China's manufacturing capital formation in general to achieve growth.However,the index fluctuated to a large extent with obvious regional differences and was easily affected by the economic environment and policy factors.The sensitivity of capital formation in the western region is obviously superior to that in the eastern and central regions,indicating that there is still a great potential for growth in the Chinese economy.However,it is still necessary to take industrial transformation and upgrading as the ultimate goal and to avoid falling into the "extensive growth quagmire" under the policy direction.In addition,the over-allocation of capital in most parts of Chinafurther explains that the reason for the high sensitivity of capital formation in the western region is the existence of a large amount of capital accumulation.The low degree of capital mismatch in the central provinces,indicating that the financial market in a stable economic environment there is a strong regulatory role.Measurement tests confirm that the imbalance of the internal structure of the financial system has a good explanatory power for the inefficiency of China's capital allocation.The improvement of financial efficiency has obvious effect on the efficiency of capital allocation.In this paper,a random-effect panel model is used to estimate the relationship between financial development and capital formation sensitivity and capital mismatch degree respectively.The study found that the regional credit preference of banks is serious,and indirect financing has obvious effect on enhancing the efficiency of capital allocation in the eastern region,leading to serious mismatch of capital allocation.The relative enlargement of the stock market did not bring about an improvement in the efficiency of capital allocation in the central and western regions,with weak correlations and even negative impacts on the eastern region.In addition,the issuance of corporate bonds in direct financing has a certain promotion effect on the capital allocation efficiency of manufacturing industries in all regions,while reducing the sensitivity of capital formation while reducing the degree of misallocation of capital.