Political Connection,Debt Financing And OFDI Of Private Enterprises

With the deepening of economic globalization and the implementation of the "going global" strategy by our government,more and more enterprises go abroad and make foreign direct investment.In particular,the private enterprises' foreign direct investment has gradually become the focus of scholars' attention.Compared with developed countries,China's special stage of development determines that the characteristics of Chinese private enterprises' foreign direct investment is greatly influenced by domestic political and policy factors.Therefore,the enterprise's relationship with the government is likely to have an important impact on its foreign direct investment.Besides,foreign direct investment is a more stringent financing activity,featuring high fixed investment,large capital demand,long investment cycle and slow return.So this paper studies the impact of political connection and debt financing on private enterprises' foreign direct investment.This paper takes the private listed companies of Shanghai and Shenzhen A shares from 2012 to 2016 as the research objects,divides the political connection of enterprises into two categories: representative members and government officials,and separately investigates effects of the two categories on enterprises' foreign direct investment,from the aspect of debt financing capacity.The study finds that:(1)There is no significant relationship between political connection of government officials and the behavior and number of the private enterprises' foreign direct investment,but a significant negative impact of political connection of representative members on the behavior and number of the private enterprises' foreign direct investment.(2)Companies with greater ability of debt financing,have bigger probability and larger amount of foreign direct investment.After further distinction between bank loans,it is found that long-term loans,short-term loans and loan duration have a significant positive impact on enterprises' foreign direct investment.Comparing to short-term loans' financing capacity,the financing capacity of long-term loans is more influential in private enterprises' foreign direct investment.(3)The stronger debt financing capacity,the more likely it is that political connection of representative members will be able to make foreign direct investment.The specific performance is that political connection of representative members will support private enterprises with high long-term loan rates and long loan terms to make foreign direct investment and increase the amount of investment.