Collateral, Political Relation Of Private Listed Companies And Debt Financing

According to pecking order,bank loan is an important source of external financing enterprises.Especially when the financial system in our country is dominated by banks,bank loan has become the most important source for our companies.However,since our government has great influence on credit resource allocation,our non-state listed companies tend to suffer ownership discrimination when lending from banks.In order to get more money from banks more easily,many non-state listed companies keen to establish close contact with the government.Meanwhile,many studies have found that the political relation can alleviate the financing constraints and helps non-state listed companies get more money from banks.In addition that the financial system is not perfect,the question of enterprise itself is also the cause.At this stage,being an important slow-release technology of credit risk of commercial banks,collateral has been widely used in the actual loan contract.Many studies have found that collateral can effectively reduce the risk of default and improve the loan financing ability of enterprise.That is to say,collateral also becomes the key to improve the ability of enterprise loan financing.By using the data of non-state listed companies from 2004 to 2013,this paper empirically studies the influence of collateral on bank financing.Furthermore,we conduct an in-depth analysis of the interchangeability of the roles of collateral and political relation in corporates' bank financing.We find that it's easier for those non-state listed companies with more collateral to get more bank loans,but there is no evidence that these companies can get more longer term of loans.We also find that the roles of collateral and political relation are interchangeable in bank loans;in other words,when no political relation is available,collateral tends to have a stronger influence on companies bank loans,and vice versa.