State-owned Share、social Capital And The Effect Of Enterprise On Bank Loan

With the development of the economic, private enterprises have become important forces to boost the social productivity. Private enterprises have taken a more important role in China’s economic development. However, China is in times of economic transition where the system is not robust, so that the development of private enterprises is subject to certain constraints. In terms of financing, private enterprises get less loans, and have simple financing structure and high financing cost. As an important external environment element for private enterprises, Chinese government owns plenty of economic resources. Therefore, in order to obtain the advantage in the fierce market competition,private enterprises try various ways to establish a relationship with the government to obtain convenience in financing.However, previous researches on political connections are mostly conducted from the perspective of the participation of private entrepreneurs, and ignore an important way of political connection that private companies introduce state-owned shares or keep a certain proportion of state-owned shares in the proprietorship. The state-owned equity represents a natural symbiotic connection with the government, and sends a signal that the enterprise has the support of the government in the system level, helping the private enterprise to get a better development.This paper takes private listed firms from 2007 to 2011 as the research sample and reviews domestic and overseas literatures to analyze the effect of the state-owned equity on getting bank loans. This paper also introduces the influence factor of social capital, which considers the society where the firm is in besides internal influence factors. The paper studies the substitution relationship between the state-owned equity and social capital. The results show that state-owned shares in private listed companies have a significant positive impact on obtaining bank loans. However, when the private enterprises are in a region where the social capital is higher, private enterprises will depend less on state-owned shares in obtaining bank loans. The results indicate that under the background of economical transition, as a way of political connections, state ownership can help private company to obtain more resources. More importantly, when social capital is higher, private enterprises will depend less on political connections which act as an informal alternative mechanism.