Impact Of Political Turnover On Firm's Loan Empirical Study

In this paper,we use China 2012 Enterprise Surveys Data Set collected by World Bank,taking the mayors' turnover of the sampling cities as the measurement of officials'replacement.By constructing a Probit regression model,we find that there is a significant negative connection between mayors' turnover and firms' loan.In order to solve the problem of endogeneity,we apply ?-Probit two step regression and get a coherent empirical results,which implies that political turnover will reduce the probability for firms to get loans.In addition,in order to find out whether the impact of political turnover varies among different types of firms,we divide the sample into groups by several variables.We find that the firms which have closer political connection affected less by officials' turnover.Firms in medium and small size,as well as the ones whose CEO is female are much more sensitive to the uncertainty brought by political turnover.The results of our research will provide both government and firms inspiration when promoting policies.So according to our main conclusion,we offer some suggestion to both government and firms.First of all,government should pay more attention to maintain the consistency and stability of the society,reducing the political uncertainty brought by political turnover.Secondly,it tries best to unblocked the information exchange channel and avoid the bubbles of political performance.Thirdly,it improves the regulation and laws of financial market.Last but not least,firms should strengthen the mechanism to face with risks.