Political Connection, Bank-Enterprise Relationship And Enterprise Performance

The medium-sized and small-sized enterprises have become the pivotal strengthof our national economy after30years development of reform and opening. Themedium-sized and small-sized enterprises play an important role in promotingeconomic growth, boosting employment, accelerating innovation and driving theeconomic system reform. In recent years, the medium-sized and small-sizedenterprises meet a series of problems due to the sluggish economic environment ofthe external and the decrease of the pace of economic growth of the internal, such asheavy tax and fees burden, imperfect property rights protection, and financingdifficulties. These questions will limit the further growth of medium-sized andsmall-sized enterprises in our country.The paper points out that the problems of the medium-sized and small-sizedenterprises lie in the lack of perfect legal environment and effective financial systemunder the background of economic transformation. The shortage of the systemrequires the medium-sized and small-sized enterprises to establish the politicalconnection to make up the deficiency of the formal system and to protect its owndevelopment. Therefore, paying attention to the problems and solving them has thevital significance in improving the operation and performance of the enterprises andpromoting the national economic growth.Under the above background, the paper makes the detailed review betweenpolitical connection, bank-enterprise relationship and enterprise performance. Thenthe paper puts forward relevant hypothesis based on theoretical basis, trying todemonstrate political connection can help the enterprises to avoid governmentregulation, obtain scarce resources and improve enterprise performance directly onone hand, and help the enterprise to improve the bank-enterprise relationship tofurther improve enterprise performance on the other hand.In terms of empirical analysis, the paper first studies the mechanism betweenpolitical connection and enterprise performance, the conclusion shows that politicalconnection has markedly improved performance on the whole; after distinguishingthe types of political connections, the study shows that the central politicalconnection plays an more important part in promoting enterprise performancecompared with local political connection. Secondly, the paper studies the mechanismbetween political connection and bank-enterprise relationship, the conclusion shows that political connection can improve bank loans, especially short-term loans. Thenthe paper studies the mechanism between bank-enterprise relationship andenterprise performance, the conclusion shows that the scale of bank loans has anegative effect on enterprise performance, short-term loans has a positive effect onenterprise performance. Finally, the paper tests the mediating effect ofbank-enterprise relationship, the conclusion shows that the scale of bank loans playsa negative mediating effect, short-term loans and long-term loans play a positivemediating effect.According to the conclusion of empirical study, the paper proposes the policyimplications to promote the development of the medium-sized and small-sizedenterprises, such as transforming government function, improving the legal systemconstruction, and creating perfect financial environment. In addition, the paper alsopoints out the deficiencies and further direction of the research.