| Since the Third Plenary Session of the 18 th Central Committee of the CPC, private economic has made considerable progress. However, because of the institutional defects,such as the imperfection of the law system, incompletion of the financial system and the intervention of government, private enterprises encountered a series of “bottlenecks”,such as “financing difficulty”, “ high financing costs ”, “ownership discrimination”. The gap between the goal of ensuring the economic entities under all forms of ownership have equal access to factors of production and the reality is great. The development of private enterprises has been bedevilled with these problems. In order to minimize the risks brought by the institutional defects and get more resources, recently, more and more private enterprises have turned to Chinese traditional mechanism of“relationship” to make up for the shortages of formal mechanism, which is the financial connections, that is, to employ executives who have financial institution working experience.Taking advantages of such senior executives’ social capital brings many benefits for the financial related enterprises, such as strengthening internal supervision,enhancing the reputation of the enterprise, alleviating financing constraints, bringing effective resources for the enterprise, which is critical to the long-term development of private companies. One of the reasons to establish financial connections is to obtain financial support from the financial institutions to provide solid backing for long-term development of enterprises. But how about the effects bring from financial connections?What is the effect of financial relationship to the growth of private enterprises? Existing literature at home and abroad have provided a wide range of evidence about the influencing factors of firm growth but little based on the financial relationship. Based on the above questions, this paper attempts to study the relationship between financial connection, institutional environment and the growth of private enterprises, to explore the impact of different types of financial connections on the growth of private enterprises and whether the difference of the institutional environment will affect the relationship between financial connection and the growth private enterprise.Based on the data of Shanghai and Shenzhen A-share private listed companies from 2009 to 2014, this paper tries to examines the above questions. Firstly, based on the domestic and foreign research, combined with relevant theories and related model,this paper tries to explain the relationship between financial connection and firm growth.Secondly, the paper examines the influence of financial connection and different types of financial connection make on firm growth, and analyze whether this influence varies with the development of institutional environment. The evidences shows(1) Financial connection significantly increase the growth of private enterprises(2) Compared with non-bank financial connection, bank financial connection is more effective in promoting the growth of private enterprises.(3) Institutional environment will affect the growth of private enterprises. Under the area with incomplete financial system, both bank and non-bank connections have stronger effect on private firm growth. And under the area with higher government intervention, bank connections have stronger effect on private firm growth. Lastly, under the area with weak legal environment, bank connections have stronger effect on private firm growth, but it is inapplicable to non-bank connections.The research of this paper not only broadens the literature on the financial consequences of the financial connections but also enriches the existing research of the factors affecting the growth of private enterprises. Meanwhile, this paper offers enlightment on the construction of enterprise relationship mechanism, and also has some implications for the improvement of the institutional environment. |
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