بازارهای مالی، وابستگی مالی و تخصیص سرمایه

We explore one specific channel through which finance promotes growth: the allocation of capital. Using international industrial data, we find that countries with developed financial markets invest more in growing industries, and pull out more funds of declining ones. Most interestingly, this pattern is more eminent for those industries more dependent on external financing. Various robustness checks show that the results are not driven by reverse causality, omitted variables, specific countries or industries.

A large body of research has documented that financial development in a country has a robust positive effect on economic performance (see Levine (2005), for a comprehensive survey). Given the compelling empirical evidence, efforts have been made to find channels through which financial markets contribute to growth and development. This paper explores one important channel: the allocation of capital. It has long been recognized that financial sectors have important roles in channeling funds to uses with highest returns (e.g., Bagehot, 1873 and Schumpeter, 1912). Recent theoretical studies argue that financial development promotes the efficiency of capital allocation since a well-established financial system can alleviate asymmetric information problems, screen out bad projects, and exert monitoring efforts to ensure that funds are used for productive purposes (e.g., Greenwood and Jovanovic, 1990). The theoretical literature implies that countries with more developed financial sectors should allocate capital more efficiently. In fact, Wurgler (2000) confirms this implication in a pioneering cross-country study. He constructs a proxy to measure the efficiency of capital allocation in a country and shows that it is positively associated with the level of financial development. This paper goes one step further by looking at the differential effect of financial markets on capital allocation across industries, and whether this differential effect is related to the level of financial development. The hypothesis is as follows: since financial development can reduce information asymmetry and lower the cost of raising funds from outsiders as argued by theory, industries more dependent on external finance should benefit more from the development of the financial sector such that their investment is more responsive to growth opportunities, i.e., the efficiency improvement of capital allocation should be more prominent in these industries. We test the hypothesis with a data set that contains annual data of 27 industries in 45 countries from 1963 to 2002. Based on the method of Wurgler (2000), the efficiency of capital allocation is estimated for each industry in each country as the elasticity of investment to value added in that industry. The financial dependence index is taken from Rajan and Zingales (1998) and measures the degree to which an industry relies on external funds to finance its activities due to technological factors. Then we regress the efficiency measure at the industry level on an interaction term of industrial dependence on external finance and country level financial development. Our results confirm that financial development has differential effects on industrial capital allocation, namely industries more dependent on external funds have higher investment elasticities in countries with better developed financial sectors. Thus financial markets not only improve the overall efficiency of capital allocation in a country as found in Wurgler (2000), but also benefit more toward those financially dependent industries. Our results are robust to possible reverse causality, different specifications, subsamples and outliers. This paper is most closely related to the seminal work of Wurgler (2000), who developed the method to estimate the efficiency of capital allocation used in this paper. He constructs the efficiency measure at the country level, and shows that financial development improves the efficiency of capital allocation across countries. However, his result suffers the common problems of cross-country regressions. In contrast, we estimate the efficiency of capital allocation at the industry level, and the cross-industry and cross-country nature of our panel data allows us to avoid most problems of cross-country studies. First, our results are less prone to the endogeneity problem as we focus on a specific mechanism through which financial markets affect capital allocation efficiency. Second, we control for unobserved industry and country specific effects, and greatly alleviates the omitted variable problem. Third, we allow for heterogeneous effects of financial development on capital allocation due to differential financial dependence of industries. Hence our paper is a complement and extension to Wurgler’s work. This paper is also related to the large empirical literature on financial development and economic growth initiated by King and Levine (1993). 1 Among the ample empirical studies, the work by Rajan and Zingales (1998) is particularly relevant to our paper. They propose a new approach to look at the differential effects of financial development across industries. The idea is that, if a developed financial sector can provide funds at relatively low costs, then it should benefit most those industries that have highest demand for external funds. Using an interaction term between industrial dependence on external finance and country level of financial development, they confirm their hypothesis that industries more dependent on external finance tend to grow faster in countries with more developed financial markets. We follow their methodology and contribute to the literature by looking at one specific channel through which finance promotes growth, i.e., the allocation of capital. There are also a number of studies that pay attention to other channels through which financial markets facilitate growth. Beck et al. (2000b) study whether financial development promotes growth through higher saving rates, capital accumulation or technological progress. Using both pure cross-country and dynamic panel analysis, they find that financial markets enhance economic growth mainly through productivity growth, while its effects on saving and capital investment are rather limited. Carlin and Mayer (2003) also examine whether financial markets encourage capital investment or R&D investment. Using cross-country and industry data, they show that countries with better financial markets tend to have more R&D investment in industries which depend more on external finance, while there is little differential effect of financial development on industrial physical capital investment.

This paper provides empirical evidence on the effects of financial markets on capital allocation across industries and countries. Using the estimated investment elasticity to value added as a measure of the efficiency of capital allocation, we find that countries with better financial development tend to have higher investment elasticities in industries more dependent on external finance. The findings support the theoretical argument that financial markets channel funds to most productive uses and ensure that firms and industries with good growth opportunities are able to invest more even if they do not have enough internal funds available. Thus our work can be viewed as one step further toward understanding specific channels through which finance promotes growth.