Industrial Policies and Group Company Debt Distribution

Wu Jinghua; Zou Ziye; Wang Hongjian

doi:doi:10.16538/j.cnki.jfe.2019.04.002

Summary

Under the background of imperfect financial system construction in China, the financial development of various regions shows inadequate and unbalanced characteristics. The lag of financial development leads to higher financing constraints, especially in non-state-owned enterprises. At the same time, with more and more diversified business of listed companies, group operation has become an important strategic organizational form for the development of companies, and the financing activities of group companies have a significant impact on their sustainable development. In daily operation, group companies will take the parent company on behalf of the group, undertake the task of raising funds needed for the development of the whole group, and then allocate funds among subsidiaries（hereinafter referred to as " concentrated liabilities”）.　　At present, China is in the stage of supply-side structural reform, and deleveraging is the most difficult task in supply-side structural reform. Deleveraging is mainly aimed at adjusting the high debt ratio of enterprises. In order to implement the task of deleveraging in an orderly way, the most basic task is to accurately identify the debt ratio of enterprises. Concentrated liabilities of group companies may lead to invisible liabilities of subsidiaries. More importantly, invisible liabilities will gradually increase the systemic risk of the industry and increase the instability of the real economy. Therefore, it is not only of great theoretical significance, but also of profound policy implications to study the concentrated liabilities of group companies.　　Based on the above research background, this paper examines the impact of industrial policies on the concentrated liabilities of listed companies and their economic consequences. The test results show that the group listed companies supported by industrial policies have higher degree of concentrated liabilities, and this relationship is more obvious in non-state-owned group companies, while weakening in group companies whose subsidiaries have relatively stronger profitability. The test of economic consequences shows that companies with concentrated liabilities enlarge the financing convenience brought by industrial policies, not only significantly reduce the financing cost of the company debt, but also significantly reduce the inefficient investment of companies, especially alleviate the insufficient investment of companies. The research results also support the " financing expansion effect” of group companies with concentrated liabilities supported by industrial policies, and the " interest-saving effect of loans”.　　The possible contributions of this paper are as follows: First, based on the financing convenience of industrial policies, this paper empirically verifies the motivation and mechanism of the group company’s concentrated liabilities. The results show that the group company is more willing to use the method of concentrated liabilities to finance under the support of industrial policies, in order to reduce the financing cost of the company. Second, this paper takes industrial policies as the breakthrough point, and discusses how industrial policies affect the debt way of group listed companies. This is different from the previous studies which simply regard listed companies as a whole. This study will help to expand the research framework of macroeconomic policies and micro-enterprise behavior. Third, using the advantage of financial data disclosure of listed companies in China, this paper studies how group companies choose debt financing under the influence of industrial policies, which is different from the previous focus on micro-factors of group companies, enriching the relevant research on the financial behavior of group companies.