Creditor Protection, Commercial Credit And Corporate Debt Financing Costs

According to social financing cost data,the average financing cost of bank loans in 2017 was 6.6%,and the average financing cost of corporate bonds was 6.68%.The financing cost of corporate debt is still high.Difficulty and high cost of financing has become a difficult point that has seriously plagued China's economic development.The party's 19 th National Congress report pointed out that to further deepen financial reforms,"de-capacity,de-stocking,deleveraging,cost reduction,and shortcomings",makes financing problem and high cost issues a key task of government work.Based on this background,how to reduce the cost of corporate financing debt has become the long-term focus of government,enterprises and academia.Listed companies,as the main financing body in China's capital market,one of their listing purposes is to reduce financing constraints and financing costs.In a certain sense,going public is the future of corporate growth.However,after the company goes public,how to pursue the maximization of shareholder value,protect the interests of creditors,coordinate the balance between the interests of shareholders and creditors,create a good corporate image,and build a harmonious social credit system become a topic with great realistic significance.Research of Qian and Strahan(2007)found that the more perfect the protection clauses for the rights of creditors,the higher the efficiency of implementation,not only the longer the term of the loan,but also the lower the rate on the loan.With China's comprehensive progress in administering the country by the law,can the cost of debt financing for Chinese enterprises be mitigated during the improvement of the legal system related to the protection of creditors?The "Real Property Law" and "Bankruptcy Law" promulgated in 2007 have made major adjustments to China's original laws,for example,accounts receivables and other current assets are allowed to be pledged collateral and process procedures have been simplified,which improves the ability of creditors of an enterprise to resolve risks,enhances protection of the creditor's interests,and expands corporate financing channels.Among them,financing by commercial credit channel increased significantly.In 2007,China's listed companies' accounts receivable increased by 458% year-on-year,and accounts payable increased by 69% year-on-year.The increase in a corporate's accounts payable can reflect the recognition of the creditworthiness from the seller's enterprise,which is passed on to banks and other institutions with good credit characteristics,and the corporate's bargaining power will be improved.At the same time,Jiang Wei et al.(2016)found that after the introduction of the Property Right Law,the financing obtained by companies using their receivables as pledged collateral has increased,which to a certain extent,has alleviated the pressure on corporate operating funds and the bank's credit rationing.It helps to improve the bargaining power of enterprises and increase the possibility of lower interest rates on loans.In this context,given that the implementation of the Property Law and the Bankruptcy Law on enterprises is mandatory,enterprises cannot follow their own circumstances,and also cannot endogenously choose whether and when to be affected by the law.This article took the implement of the "Real Right Law" and "Bankruptcy Law" as natural shock events,and used A-share listed companies from 2003 to 2011(excluding 2007)as a research sample,using the double difference model of time effect and fixed effect to examine that if creditor protection enhances the impact on corporate debt financing costs.Regression results show that compared with enterprises with a high percentage of fixed assets,debt financing costs of enterprises with a low percentage of fixed assets have fallen significantly after the implement of the Property Rights Law and the Bankruptcy Law,and the processing effect coefficient is significant at a significant level of 1%,indicating Creditor protection has a positive role in driving down corporate debt financing.At the same time,considering the premise assumptions of the double difference model,this paper conducted hypothesis verification and robustness test,and also performed PSM-DID model regression.The results were consistent with the DID model regression results.Further research found that no matter whether the commercial credit measurement index in terms of accounts payable or accounts receivable was used for regression,the intermediary effect regression results were significantly different from 0,which means that the increase in commercial credit financing is one of the ways for creditor protection to reduce the cost of corporate debt financing.The innovations of this paper are mainly as follows: Firstly,this paper provides new experimental evidence for the study of creditor protection on the cost of corporate debt.Specifically:(1)From the perspective of the implement of the Property Rights Law and the Bankruptcy Law,the study of how the creditor protection system affects corporate debt financing costs has enriched the research literature of "Law and Finance".Secondly,unlike Qian Xuesong(2019)'s research on the relationship between the reform of the collateral property rights system and the cost of debt financing,(1)this paper adds a test of the intermediary effect of commercial credit,and the empirical results reveal the existence and the degree of intermediary role of commercial credit played on the reduction of corporate debt financing costs due to creditor protection.(2)This article uses Chinese A-share listed companies as the research sample,which faced a more similar operating environment,making the regression results more effective.Thirdly,this article uses the double differential model to better deal with endogenous issues.This article takes the implementation of the "Property Law" and "Bankruptcy Law" in 2007 as exogenous events,overcoming the endogenous problem of variables through the double difference method,and better verifying the relationship between creditor protection and corporate debt costs.Fourthly,this article has practical significance.Under china's comprehensive policy of "ruling the country by law",this article studies China's judicial practice from a microscopic perspective,which is conducive to in-depth understanding of the protection of investors by the law,and helps to provide reference for the continuous establishment and improvement of legal policies.In the process of debt financing,whether financing costs absorb and respond to legal policies in a timely manner,to a certain extent,can reflect and test the impact of policies on debt financing.