| China is in a period of economic restructuring at present, political environmentas an important part of the business external environment, is playing an important roleon the survival and development of enterprises. Along with rapid economicdevelopment, small and medium-sized private enterprises become more and moreimportant to the development of our country’s economic, but the problem of financingis still the bottleneck which restricts the development of small and medium-sizedprivate enterprises in China. Political connection is an important reputationmechanisms, it can provide implicit guarantee when the private enterprises get thebank loans. Now more and more enterprises establish political connection in order toget similar protection of state-owned enterprises. So these enterprises can get rid ofdifficulties in financing, they can obtain a better development.This paper analysis the relationship between political connection and bank loansduring the period of2007-2011. Private companies which listed on the SME board ischoose as the sample. After collecting the political background of key corporateexecutives (Chairman of the Board, CEO), we perform the regression analysis. Theempirical results show that:(1) Political connection is widespread in small andmedium-sized private enterprises is widespread, there are34%private enterpriseshave political connection on the SME board;(2) Small and medium-sized privateenterprises with political connection can get more bank loans than that withoutpolitical connection, and the loans are long-term credit;(3) In the enterprise withoutpolitical connection, similar political connection can also help companies get morebank loans;(4) In the area where the market is not perfect, political connection isimportant to the bank loans.Finally, the paper gives some suggestions for relevant departments and small andmedium-sized private enterprises, in order to promote the development of small andmedium-sized private enterprises in our country. |
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