The Influence Mechanism Of Political Connection On Real Estate Supply Chain

Based on the practical needs of strengthening industry’s sustainable development ability and improving enterprise competitiveness and the systemcharacteristic of government connection’s great influence on market operation and enterprise behaviors in China’s real estate industry, this paper takes government connection as entry point, and takes micro supply chain links as research scope, and studies the influencing mechanism of government connection on real estate supply chain. This paper is aimed to find out the characteristics and existing problems in real estate industry on system structure, enterprise competition strategy, government function positioning andgovernment and enterprise relationship. In practicalaspect, by analyzing the deep reason of the problem and exploringrelative solutions and policy suggestions, this paper tries to give specific suggestions on further improvingreal estate market mechanism, enhancingreal estate enterprise’s competitiveness and promoting industry sustainable development. In theoretical aspect, this paper aims to expandmicro-study ongovernment connections. On the other hand, by combined with the feature of China’s real estate market, this paper enrichesthe theoretical framework of government connection.In the study of the impact of government connection on good flow of real estate supply chain, this paper focuses on land leasing stage and discusses the relationship between government connection and enterprises’ bid-rentability and takes empirical study using micro land market datain Beijing.The results show that in listing auction, which is regarded as a relatively market-oriented land leasing method,government-connecting enterprises tend to raise higher price probabaly due to the advantages of lower financing cost andfaster and more accurate market informationwhich government connection provides. In tenter auction which contains more policy objectives and doesn’t alwaysfollow ―success of highest-price-offer‖ principal, enterprises with government connection are more likely to obtain implicit subsidies when winning the bidding of land parcel which locates in certain regions of the city where local governmentfocuses on developing.In terms ofinformation flow of real estate supply chain, this paper focuses on the impact of policy and market uncertainty part of which is created by government’s intervention in market on enterprises’ presell price and opening timing decision, finding that the external environment uncertaintieswhich government intervention provides does no good for developers to obtain sufficient information for decision making, and will lead to the delay of opening time and the rise of presell price.This mechanism reducesthe effective supply of the real estate market and pushes up housing prices to a certain extent.As forcapical flows, this paperdiscusses the effects of government connection on real estate enterprises’ capital management from three aspects: enterprise capital acquisition, capital operation andfinancial risks.The main findings are as follows. Firstly, government connection significantly reduces enterprises’ financing constraints;state-owned enterprises have higher loan ratio than non-state-owned property company; as for state-owned enterprises, the improvement of loan ratio is more significant for local state-owned enterprises than central ones, which indicates the mechanism that local enterprises undertake ―political assignment‖ from local government of increasinglocal development and get more financial supports from government-related financial institutions in return; for non-state-owned enterprises,the government connections established by hiring senior managers with government working or NPC(the National People’s Congress)or CPPCC(the Chinese People’s Political Consultative Conference) experience helpnon-state-owned enterprises obtain long-term loans.Secondly, in terms of capital efficiency, the state-owned background of real estate companies will increase the probability of excessive investment; compared with centrol state-owned enterprises, the government connection background of local state-owned enterprises increases the probability of excessive investment more significantly.Finally, as for financial risks, the government connection background of state-owned enterprises significantly reducesenterprise’s bank loan default risk, and this effect is greater for relatively smaller companies.