Credit rationing and cash efficiency of listed companies in China

It´s an indisputable fact that credit policy inclines to state-owned enterprises in China. Based on it, by using a sample of 1399 A-share listed companies over the year 2009 to 2011, we investigate the difference of credit rationing and cash efficiency between state-owned and private enterprises. Results show that the existence of “Bank Power” forces enterprises obtaining credit to increase the amount of non-free capital, which compresses their free capital. For private enterprises, in spite of lower credit, their self-possessed free cash appears more significantly positive correlated with firm performance and enterprise value, which represents higher cash efficiency. What´s more, the phenomenon that non-free cash presenting significant and negative correlation with firm performance and value means that bank power deprives part of enterprise profit and transports it to banks. Therefore, it is of great necessity to improve credit policy and better the allocation of credit resources, as well as constructing fair environment so as to promote harmonious development of state-owned and private enterprises.