Research On The Effect Of Political Connection And Debt Financing On Enterprise Performance In Small And Medium-size Enterprises

In some developed countries including the United States and developing countries like China, the phenomenon of political connection in enterprises is widespread. To some extent, political connection can help corporate improve its ability of obtaining external resources, financing facilities and tax benefits and so on. It plays a positive role in promoting enterprise performance. Currently, the development degree of our country’s debt financing market is relatively lower, banks as the main body of creditors are useless on enterprise supervision and restraint mechanism. These lead to the positive role of debt financing on corporate governance and corporate performance doesn’t play out. Based on 1304 small and medium-sized listed enterprises in Shenzhen stock market from 2011 to 2013, this paper discusses political connection’s effect on the small and medium-sized enterprise performance, negative effect of debt financing on the small and medium-sized enterprise performance, and political connection’s effect on the relationship of debt financing and enterprise performance respectively.In this paper, the main research conclusions are as follows:(1) Political connection has a positive effect on enterprise performance.(2) Debt financing has a negative effect on enterprise performance.(3) Political connection has a positive effect on the relationship of debt financing and enterprise performance.