Study On Political Connection And Enterprises Debt Financing In Economic Transition

In this paper, we take listed enterprises in Shanghai and Shenzhen A stock market during 2007 and 2009 as the sample. We define government's political connection by the employment in government or the experience of playing CPPCC deputies of the chairman or general manager of a corporation. To research the two main channels of enterprises debt financing,bank financing and commercial credit financing,we select cross-section data to make a multiple linear regression. Based on the result of regression, influence of the political relation to enterprise debt financing is analyzed. To go a further step, we take consideration of regional environmental, political ties and bank loans all in account. After a regression on the model of corporation financing banking and commercial credit financing, we find that:(1) Political relation has a significant positive effect to the bank loans financing of listed companies in general, while in the analysis of state-owned enterprises or non state-owned enterprise group, this effect becomes not significant.(2) We make a further analysis after distinguishing the ways of enterprise political relation. Ways of enterprise political relation are divided into two kinds, experience of working in government departments, government officials, and served as class or current CPPCC members or deputies to the NPC class members. We find that executives'government official experience is the main factors which conveniences bank financing of enterprises. It has brought a significant positive impact to rate of bank loans and the maturity structure for enterprises.(3) Generally speaking, improvement of the institutional environment weakens the effects of corporation's loan effect from political relation. Especially the improvement of legal environment protection degree plays a significant negative role to government official relation impact to the debt maturity structure of enterprise.(4) As contrasted to the help of political relation with officials when enterprises obtain bank loans,in the process of obtaining commercial credit financing, the political relation of government officials is a signal, which weakened enterprises'availability of commercial credit financing.(5) According to comparison of political strength coefficient of different regions, we find that the lower the level of financial development, the stronger the weakening effect of political ties to the corporate commercial credit.