Monetary policy and corporate financing: Evidence from different industries. (March 2022)

• Record Type: Journal Article
• Authors: Li, Yaoyao; Qi, Yuan; Liu, Licheng; Yao, Jingtao; Chen, Xin; Du, Ting; Jiang, Xin; Zhu, Daolin
• Is Part Of: Cities. Volume 122(2022)
• Publication Date: 2022-03
• Subjects: Real estate market -- Monetary policy -- Panel regression model -- Expectation; City planning -- Periodicals; Urban policy -- Periodicals; 711.4
• DOI: 10.1016/j.cities.2021.103544
• Languages: English
• ISSNs: 0264-2751

Abstract

Abstract: To reveal the effect of monetary policy on corporate financing, this study compared the effect of tightened monetary policy on bank loans and commercial credit financing for real estate companies and manufacturing companies. We further analyzed the land purchase behaviors of typical real estate companies under different monetary policies. The results indicated the following: (1) The effects of monetary policy were heterogeneous among different industries. Tightened monetary policy significantly inhibited the financing scale of manufacturing companies in terms of both bank loans and commercial credit, but it had no effect on real estate companies. (2) The phenomenon of financing discrimination was found to exist among listed Chinese companies. Bank credit preference for state-owned enterprises was demonstrated for both the real estate and manufacturing industries. Lastly, (3) when positive expectations regarding real estate market development were not changed, government intervention through monetary policy was ineffective. These findings can provide a reference for real estate market regulation and credit allocation. The government should seek to change overly positive expectations regarding housing prices and strengthen the construction of a prudential regulation system to avoid the systemic financial risks caused by the real estate market. Meanwhile, it is necessary to relax the financing constraints of private enterprises and change the soft budget constraints of state-owned enterprises to eliminate credit discrimination. Highlights: We focused on differences in monetary policy's effects on the financing behavior of companies in different industries. Tightened monetary policy inhibited the financing of manufacturing companies, but it had no effect on real estate companies. When government intervention could not change public expectations, the real estate companies were immune to monetary policy. The expectation that housing prices would only rise but not fall was rooted in the particularities of housing. The phenomenon of financing discrimination was found to exist among listed Chinese companies.