Monetary Policy, Ownership Discrimination and Leverage Differentiation of Non-financial Enterprises

Abstract

This paper systematically analyzes the impact of monetary policy on non-financial enterprises’ leverage differentiation under bank credit discrimination, taking advantage of data provided by non-financial listed companies from 2007 to 2017. The results show that bank credit discrimination will enlarge the leverage differentiation between state-owned enterprises and non-financial enterprises, and this effect is more significant in the enterprises with political connections and government subsidies, in the regions with low market-oriented allocation of economic resources, inefficient government administration and high financing costs. Compared with moderately loose monetary policy, tightening monetary policy will enlarge the degree of leverage differentiation between state-owned enterprises and non-state-owned enterprises; however, the moderation of monetary policy, increase in the bankers’ confidence index and greater effectiveness of the central bank will weaken the positive effect of monetary policy on the leverage differentiation of state-owned enterprises and non-state-owned enterprises to some extent. Further discussions find that bank credit discrimination will enlarge the degree of financial leverage differentiation between state-owned enterprises and non-state-owned enterprises whether in the period of loose monetary policy or tightening monetary policy, but has no significant effect on operational leverage differentiation. Hence, we identify the phenomenon of non-financial enterprises’ financialization and disassociation of finance from the real economy at this stage from the perspective of fund usage. Policy implications are that monetary policy should be accounted for in the process of de-leveraging, central bank communication should be strengthened and public expectations stabilized. At the same time, regulators should pay attention to the structural leverage differentiation among heterogeneous enterprises.