Non-Bank Connection,Financing Constraints&Cash-Cash Flow Sensitivity

Under the condition of China's transition economy,lots of corporations prefer to gain stakes in financial institutions.There were 207 non-financial listed companies taking stakes in financial institutions,accounting for 9.70%of all non-financial listed companies.The State Council promulgated the Several Opinions on Promoting the Healthy Development of Private Investment in 2010.Private capital is allowed to run financial institutions,and the government will place as little restrictions as feasible under the premise of strengthening effective supervision,promoting standardized operations and preventing financial risks,the opinions say.The State Council promulgated the Guidance on Economic Restructuring,Transformation and Upgrading of Financial sector in 2013.Private corporations are encouraged to gain stakes in financial institutions and participate in the process of restructuring in financial sector,the guidance says.Obviously,government support private corporations to gain stakes in financial institutions,including non-bank institutions.So it holds much significance to study on the non-bank institution connection in this context.Borrowing money from financial institutions is one of the most important financial options for corporations in China.Currently,the long-term difficulty in financing has already become the biggest bottleneck in the development of Chinese companies.What's more,it restricts the upgrading and reforming of Chinese economic system.Previous studies of domestic and foreign scholars have found that financial institution connection can ease the financing constraints of corporations.But most of those studies focus on bank connection,only a few studies concentrate on non-bank connection.So it is meaningful to study on the impact of non-bank institution connection upon financing constraints for companies with severe financing problems and for government who encourage private capitals to flow into financial sector.And it's also helpful to research on the role of different property right and monetary policy playing in the impact of non-bank institution connection upon financing constraints.In this paper,sample data from the year 2011 to 2016 China's A-share listed companies is chosen to make an empirical study on the impact of non-bank connection upon financing constraints and how the nature of property right and macro monetary policy influencing on it.The research results show that compared with corporations without non-bank connection,corporations with non-bank connection have a lower cash-cash flow sensitivity.Furthermore,there are significant differences on the degree of financing constraints between stated-own corporations and private corporations,compared with the stated-owned corporations,non-bank connection can ease the degree of private corporations' financing constraints more significantly.Moreover,the degree of corporates' financing constraints is more severe during the period of monetary policy tightening,compared with the period of monetary policy easing,non-bank connection can ease the degree of private corporations' financing constraints more significantly during the period of monetary policy tightening.The innovation of this paper lies in these points:(1)This paper studies on the impact of non-bank connection upon financial constraints of A-share listed companies,and the discussion on non-bank financial connection will be helpful to enrich existent foreign and domestic.research content;(2)This paper explores the role of different nature of property right playing in the impact of non-bank connection,and the study has supplemented some new research findings in the aspect of non-bank connection upon financing constraints;(3)This paper probes into the role of macro monetary policy playing in the impact of non-bank connection upon private corporations' financing constraints,and the study has provided a new visual angle for existing literature;(4)This paper can serve as valuable reference for the decision-making of the government on encouraging and guiding the non-governmental investment.