Empirical Research On Bank Association And Corporate Financing Constraints

China is in the stage of economic transition period.The capital market is not perfect and the diversification of external financing channels is restricted,so in the rapid development environment,it is difficult for enterprises to meet the financing needs.In view of the fact that bank financing has been dominated the financing channels in our country,how to obtain enough financing from bank is an urgent problem encountered by many fast developing enterprises.Therefore,many companies began actively seek Bank connections(BC)in order to alleviate the inadequate financing problem faced in development process.Bank connections(BC)are deemed to an effective method of mitigating firm's Financial constraints(FC)intuitionally.However,due to interact effects between bank connections and political connections,the theory and evidence on the BC-FC linkage are both few.In order to solve the problem of financing constraints faced by Chinese enterprises in the process of economic transformation,this paper analysis the interact effects between bank connections and political connections,and distinguish the financing constraints effect and its influence way.This paper identifies the BC-FC association by using the 2003-2012 publicly listed firms of China stock market as a unique setting.First of all,by grouping the political connections,we analysis the mitigating of financing constraints for bank connections company;Secondly,considering the influence of political connections on the relation between bank connection and financial constraint,we study the role of political connections of financing constraints,and analysis the relationship between political connections,bank connections and financial constraints.The results show that,1)the bank connections(BC)can mitigate the financial constraints of enterprises,and there is a significantly adverse connection between BC and FC;2)this significantly adverse BC-FC connection is based on political connections.In other words,building political connections are the prerequisite of a significantly adverse BC-FC association for a given firm;3)the significantly adverse BC-FC linkage holds in SOEs but not in non-SOEs,resulting from the thinner political connections of Non-SOEs in contrast to SOEs.This research can inspire us that the function of bank connections(BC)is hard to relive financial constraints without the political connections(PC)in the transition countries such as China.Therefore,in order to solve the problem of financing difficulty,the relevant decision-making departments should eliminate the discrimination in the allocation of credit funds as soon as possible,and make full use of bank connections(BC)in the transition market economy.In addition,we should accelerate the reform process of the capital market and achieve the rational allocation of resources.