Research On The Influence Path Of Bank Competition On Enterprises’ Inefficient Investment

With the development of China’s financial system reform and the 2016’s market interest rate reform,the competitiveness of China’s banking has been increasing,However,on the one hand,the growth rate of fixed asset investment in China’s enterprises has slowed year by year,with the growth rate below 10% in the past 6 years,and in 2021,the growth rate of fixed assets in China will be only 4.9%.On the other hand,the structural system of the banking industry is still dominated by large state-owned commercial banks and characterized by the loss of initiative of small and medium-sized banks,which has become a shackle for the banking industry to serve the real economy.By the end of 2021,the total assets of six major national commercial banks have reached 138.4 trillion yuan,accounting for 40.10% of the total assets of financial institutions in the national banking industry.A key feature of financial supply side structural reform is the continuous relaxation of government regulation on the banking industry.In the increasingly competitive environment of banks,the relaxation of banking regulation will inevitably affect the lending behavior of banks,thus affecting the investment behavior of enterprises.On the one hand,this influence comes from the fact that bank credit,as an important channel and tool for corporate financing,can alleviate corporate financing constraints to a certain extent by increasing effective supply;on the other hand,it comes from the internal agency conflict and the camera governance role of bank credit,which may reduce corporate risk-taking by increasing bank supervision incentives in a competitive banking environment and thus have an important impact on corporate inefficient investment.The increase in bank supervision incentives in a competitive banking environment may reduce firms’ risk-taking and thus have an important impact on firms’ inefficient investment.With the development of China’s securities market,by 2021,the number of listed companies has reached 4856,with a total market value of 96.53 trillion yuan,ranking the second in the world.The total operating revenue of listed companies is 64.97 trillion yuan,accounting for 56.81% of China’s annual GDP,,so the research object of this paper is limited to the listed companies of Shanghai and Shenzhen A-shares from 2007 to 2020.In order to investigate the impact of bank competition on inefficient investment and its mechanism,firstly,we systematically review the relevant domestic and foreign literature,based on which we propose the main hypothesis of this paper to analyze the impact of bank competition on inefficient investment of listed companies.Secondly,the financial license data published by the CBRC is used to collate and calculate the market concentration index of banking industry as a measure of bank competition;calculate the inefficient investment of listed companies,as well as sub-sample for under-investment and over-investment;and also calculate to get the indicators of financing constraints and corporate risk-taking.Finally,combining fixed-effects model and mediating-effects model,we empirically test the impact of bank competition on corporate inefficient investment and the mediating effect of financing constraints and corporate risk-taking.We select companies with different corporate nature and different market concentration for grouping and study the difference of the impact of bank competition on listed companies’ inefficient investment under the difference of different cross-sectional characteristics.According to the empirical results of this paper,the following conclusions are drawn:(1)Bank competition can reduce corporate underinvestment,discourage overinvestment and reduce inefficient investment.(2)Bank competition reduces underinvestment mainly by alleviating financing constraints,and reduces overinvestment mainly by reducing corporate risk-taking.(3)For state-owned enterprises,bank competition mainly plays the role of reducing corporate risk-taking and discouraging over-investment;for non-stateowned enterprises,bank competition mainly plays the role of alleviating corporate financing constraints and reducing corporate under-investment.(4)Compared to industries with high market concentration,increased bank competition has had a more pronounced effect on boosting inefficient investment by firms in industries with low market concentration.(5)Interest rate marketisation has strengthened the dampening effect of bank competition on firms’ inefficient investment.The novelties of this paper are:(1)this paper studies the issue of corporate inefficient investment from a new perspective of bank competition,thus enriching and developing the literature in the area of corporate inefficient investment.At the same time,the study embeds the perspective of heterogeneity in firm nature and market concentration,selecting firms with different firm nature and different market concentration for grouping and studying the differences in the impact of bank competition on inefficient investment in listed firms under different cross-sectional characteristics,providing new empirical evidence for firms with different firm nature and different market concentration.(2)Based on the financing constraint mechanism and debt governance mechanism of bank competition,the impact of bank competition on firms’ inefficient investment is analysed in a sub-sample,drawing on Richardson(2006),Biddle et al.(2009)and Akron S(2022)to calculate firms’ inefficient investment,and the sub-sample as under-investment and over-investment;referring to Hadlock and Pierce(2010)for indicators of financing constraints and John et al.(2008)and Tian(2022)for indicators of corporate risk-taking.(3)Both the debt governance mechanism and the financing constraint mechanism of bank competition are incorporated into this paper in the process of examining the impact of bank competition on the investment behaviour of micro-entities.On the basis of discussing the influence of bank competition on enterprises’ inefficient investment,this paper further studies the intermediary effect of financing constraints and enterprises’ risk taking.