An Empirical Study Of The Impact Of Non-financial Factors On Loan Pricing Of Finance Companies In Enterprise Groups

With the rapid development of trends in enterprises conglomeration,the influence of finance companies which help conglomerates improve the capabilities of capital management and realization of group strategy has become increasingly significant.As the main business of a finance company,loans should not only improve the capital allocation efficiency for the enterprise group,but also support valued members and strategic projects of the enterprise group in saving financial costs of the strategy implementation.Loan pricing is an important link in playing this role well.At present,there are few researches on loan pricing based on the characteristics of finance companies.With the advance of the interest rate marketization,finance companies urgently need to improve differential loan pricing method and model which are different from commercial banks.Accordingly,it is necessary to study the non-financial factors related to the special functions of the finance company incorporated in the loan pricing decision first.The loan data were collected from 11 major finance companies in power generation industry enterprise groups,and the impact of non-financial factors on the loan pricing of these finance companies was empirically tested for the first time.A hypothetical model was proposed based on the theories relevant to loan pricing of the finance company.Through multiple linear regression analysis,a negative correlation was observed between the loan interest rate and the 5 non-financial factors which include account online rate,client’s importance,capital concentration,regional factors,shares held by the conglomerate.The findings indicate that,due to the special function positioning of the finance company which is different from the commercial bank,the finance company does not pursue the maximization of company profit.The principle of loan pricing of finance companies is to help conglomerates improve the capabilities of the capital management and the whole benefits,meanwhile,the realization of group strategy under the condition that the capital costs,management costs and risk can be compensated.A few of the non-financial factors neglected by banks have been taken into account when finance companies pricing loan,which have an important impact on performing the function of finance company.On the one hand,finance companies take into account the factors of corporate borrowers in the loan pricing,such as account online rate,client’s importance and capital concentration.And they share interests with the strategic members of the conglomerate and the members that have more contribution to the capital centralized management of the conglomerate by lending at preferential rates.On the other hand,considering factors such as regional factors and shares held by the conglomerate in the loan pricing can contribute to the elevation of the enterprise group benefit,as well as the net profit attributable to the owners of the parent.It reflects the finance company’s function to help conglomerates enhance the management in capital concentration and allocation,promote the realization of group strategy,reduce cost for benefit improvement.After all,based on the conclusions of this research,several recommendations are made to perfect the loan pricing management of finance companies.This thesis makes up for the lack of empirical study on the factors of differential loan pricing of finance companies.In practice,the conclusions can be used for establishing loan pricing model of finance companies in power generation industry.