Research On The Influence Of Political Connections On Enterprises' Over Leverage

Since the 2008 global financial crisis,the debt ratio of Chinese enterprises has been steadily rising.But is it high debt is excessive debt?Are companies with political connections more inclined to be over-indebted and have higher levels of excess debt?Are there any differences in the impact of executive-level political connections on the excessive debt of firms with different property rights?Political connections can both bring benefits to the company and negatively affect the company.There are many literatures on the influence of political connections on corporate value and corporate governance in domestic and foreign scholars,but there is little literature research on how this unique relationship between government and enterprises affects corporate debt.This paper is closely related to China's institutional background.Taking the non-financial A-share listed companies from 2004 to 2014 as a sample,we use the degree of deviation of the actual debt ratio of the enterprise from the target debt ratio to measure excessive debt,and examine the excessive debt of the enterprise from both long-term and short-term perspectives.Level,and measure different types of political connections,and analyze the impact of political connections on excessive debt under different property rights.Based on the full sample of China's non-financial A-share listed companies from 2004 to 2014,the empirical test examines the relationship between political connections and corporate excess liabilities.After controlling other economic factors and corporate governance factors that affect excessive debt,the study found that:(1)Whether in state-owned or non-state-owned enterprises,our conclusions show that the ratio of politically-linked enterprises in the long-term and dynamic perspective Non-political affiliates are highly likely to be over-indebted,and firms with political connections in the short-term and static perspectives are less likely to be over-indebted than non-politically connected firms.(2)Whether in the long-term and dynamic perspectives or in the short-term and static perspectives,state-owned enterprises with political connections are more likely to be over-indebted than private enterprises with political connections.(3)Different types of political connections have different effects on the excessive debt of enterprises.The political relationship between the board of directors and the CEO is significantly positively correlated with the excessive debt of the company.The independent directors are also significantly and positively related to the excessive debt of the enterprise,but the degree of influence of the two on the excessive debt of the company is different.The empirical results of this paper have good robustness for different sample periods and variable measurement methods.