Monetary Policy, Financing Constraints and Corporate Investment

Based on the quarterly data from Chinese listed manufacturing corporate during 2004 and 2011, we analyze the influence of monetary policy on enterprise investment behaviors. The results of which show that: (1) Investment fluctuation in the listed companies' is accompanied by monetary policy adjustment, i.e., lower investment rate goes in line with tighter monetary policy, and vice versa. (2) The impact of monetary policy on investment differs across firms with respect to different financial constraints, i.e., the heavier financial constraint a firm confronts, the larger the effect on investment from monetary policy. (3) Monetary policy affects firms' investment through influencing the financial constraints over firms. Tighter monetary policy deteriorates firms' external finance constraints, therefore restrains more heavily on firm's investment.