Banking Competition and Industry Resource Allocation:Evidence from Chinese Major Industrial Enterprises
Improving the efficiency of resource allocation is the basis for achieving high-quality economic development.As the core of China's financial system,banks play a key role in credit resource allocation and corporate financing.This paper uses China's industrial enterprise data from 1998 to 2013 as a sample,and employs the branch information of Chinese commercial banks to construct the banking competition index to empirically tests the impact of banking competition on city-industry resource allocation efficiency.Firstly,banking competition is conducive to alleviating city-industry resource misallocation.To address potential endogeneity problems,this paper employs an exogenous shock event in 2009-the deregulation of the establishment of bank branch institutions-to construct a difference-in-differences(DID)model and obtains consistent results.Secondly,the mechanism test shows that banking competition can alleviate corporate financing constraints,promote fixed asset investment and R&D expenditures of non-state-owned enterprises with higher production efficiency,enhance their operational performance,and thereby improve city-industry resource allocation.Finally,heterogeneity analysis suggests that the resource allocation effect of banking competition is more significant for industries facing higher financing constraints and relying more on debt financing,providing additional evidence for the impact of banking competition on resource allocation through financing channels.Moreover,higher quality of accounting information is beneficial for banks to identify information before lending and supervise borrowers after lending.A higher regional marketization provides a better competitive environment for banks,improving the efficiency of bank resource allocation.This paper enriches research on the impact of financial sector competition on resource allocation,and provides theoretical and empirical support for China's financial marketization reform and the implementation of inclusive financial policies.On one hand,this paper expands research on the real effects of banking competition to the city-industry level.It bridges the gap between micro and macro-economic effects of banking competition,supports the market power hypothesis of banking competition,and responds to the call from David & Venkateswaran(2019)to strengthen research on China's resource allocation efficiency from the perspective of financial friction.On the other hand,against the backdrop of China's fiscal decentralization and regional competition,the"feudal economy"formed by regional protection and market segmentation has led to differences in resource allocation across regions and industries.This paper establishes the research model at the city-industry level,which better controls and captures differences at the regional level,and helps identify the marginal effects of banking competition more effectively.In addition,this paper uses the exogenous shock event in 2009 to construct a DID model,which further controls the structural differences in bank types in each city and reduces endogeneity problems such as omitted variables and reverse causality.The policy implications of this paper are as follows.Firstly,it is necessary to take the existing policies of banking entry deregulation and inclusive finance as a guide to scientifically,reasonably,and orderly improve the layout of bank branch institutions,reduce the financing costs of enterprises,and stimulate the production potential of market entities.Secondly,in the process of promoting structural deleveraging,we should adhere to the principle of inclusive services,encourage bank loans to flow to enterprises with high production efficiency but facing financing constraints,and promote a virtuous interaction between finance and the real economy.Thirdly,the increase in banking competition has raised the demand for"hard information"about enterprises.Improving the quality of accounting information is helpful in obtaining bank credit.At the national level,the formulation of a high-quality accounting standard system contributes to unleashing the dividend of banking competition.Lastly,the improvement in regional marketization makes banks pay more attention to flexible resource allocation,promoting more efficient resource distribution in different industries and regions.
Bank BranchBanking CompetitionResource AllocationTotal Factor Productivity
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