An Empirical Study On The Influence Of Debt Financing To R&D Investment From Political Connections’ Perspective

The scale and the intensity of R&D (Research and Development) investmentreflect the scientific and technological strength and core competitiveness of thecountry. At present, Chinese R&D investment intensity is not enough. R&Dinvestment in China is facing external financing constraints. Und er the indirectfinancing of bank-oriented financial system, external financing constraint ishighlighted in the debt financing constraint. Now our country is a n emerging anddeveloping country in transition, with a large number of companies hav ing politicalconnections. Therefore, this paper attempts to study the impact of debt financing oncorporate R&D investment from the perspective of political connections. It is of greatpractical significance to effectively alleviate the debt financing constraints faced bycorporate R&D investment.From the point of the financial investment theory and the theory of politicalconnections, this paper analyzes the relationship between R&D investment and debtfinancing and debt maturity structure, and explores the politics connections and thedifferent types of political connections regulating effect on corporate R&Dinvestment in debt financing constraints. On the basis of listed company’s date from2009to2012，this paper empirically tests the influence of political connections anddebt financing on firm’s research and development investment. Conclusions are asfollows:(1)R&D investment of Chinese enterprises faces with debt financingconstraints.(2)Compared to short-term debt constraints, R&D investment faces moreserious long-term debt constraints.(3)Political connections have the "double-edgedsword" effect. This study found that the political connections bring not just"resources" effect to the R&D investment, but bring more of a "crowding out" toprivate enterprises political connections.(4)The company’s cash flow, enterprisevalue and sales income are positively correlated to R&D intensity. Based on theseconclusions, we propose policy recommendations from business development andgovernment work combined with China’s national conditions.