Bank Relation?Political Connection And Financing Constraints

At present, private-owned enterprises is playing an increasingly important role in the development of domestic economy. However, the enterprises which has been gradually growing significant force to China has been facing financing constraints problem all the time.Financing constraints is refers to the enterprises in the process of external financing facing high financing cost, or financial difficulties. They had to sacrifice a considerable number of investment opportunities.As a matter of fact, to seek their own healthy development, they have started to explore some extraordinary methods which we called out of system to solve the problems. In recent years, it is the phenomenon which has aroused a heated discussion that private entrepreneurs'political participation increased substantially, that is to say, more and more private entrepreneurs have a great passion to participate in political activities. They hold that the role we called" NPC and CPPCC" is a good way to get special support of financial resources. We have been aware of some evidence directly from the members of senior administrator which they have a bank or political background in private-owned enterprises. So, this kind of phenomenon caused the author's thinking. The view is backed up by an extraordinary series of studies which indicate that informal mechanisms, to some extent, can support the development of the enterprise when the system did not work well. Among them, the relationship between Banks and political is a valuable one.In the current study, we can found that most of scholars explored the topic views from a single angle. Meanwhile, the discussion of the effect we called "the more, the better" is still rare.After reviewing relevant theories and research achievements, the paper will explore the topic by combined theory and empirical study. From theory perspective, the paper starts from literature about the definition, measurement, and some related theories of financing constraints. We take a series of analysis about bank and political relations of domestic private-owned listed enterprises, including the reason and current situation. The paper focus on the mechanism of actions that caused by the information effect and resource effect which we have defined. On the other hand, from empirical perspective, private-owned companies which listed on 2010-2014 in Shanghai and Shenzhen are selected as samples to research the impact between bank-political connections and corporate financing constraints. The paper put forward the three basic assumptions, and constructed-Banks and political connections--cash flow sensitivity mode.After the regression analysis, the paper indicate that Banks relation and political connections can play a significant role to the financing constraints of domestic private-owned listed enterprises. Meanwhile, the function we explore above is not obvious directly, that is to say, the relationship between Banks, political connections can't rise to the effectiveness of "the more, the better".