Local Official Network And Corporate Financing Constraints

Local official's behavior is embedded in the social network,and the network relations can influence official's political initiatives,and then affect political intervention of the enterprise.In recent years,literature related to local official's behavior focuses only on the personal characteristics of officials and ignores the role of social network relations.So this paper focuses on the social network relationship between government officials,and empirically investigates the effects of officials'social network on corporate financing constraints as well as the influence mechanism.It provides a new perspective for the government and enterprise research.The official sample of the research is 3375 government officials,including municipal party secretaries,provincial party secretaries,mayors and governors who were in office during 1995-2015 all over the country.The corporate sample is listed companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange.The paper arrives at the conclusions as follows:Firstly,the social network between local officials would significantly affect the level of financing constraints of local enterprises;when the municipal officials have social relationship with the provincial officials,the local corporates would face lower degree of financing constraints.Secondly,the officials who have a social relationship with superiors can help local corporates get more bank loans,but have no effect on their level of business credit.Thirdly,there are differences in the effects of official network for different types of enterprise nature,different period before or after 2012,and different degrees of financial marketization.Based on the results,the paper made some policy recommendations,which can be used for reference to the transition of government-enterprise relations and the financial market construction.