The Relationship Among Political Uncertainty, Bank Connection And Corporate Debt Financing

The relationship between politics and economic outcomes has a long history in research and public debate.There are various channels through which politics and the political process are hypothesized to influence the real economic activities.One particularly interesting connection is the effect of elections and changes of policymakers on the real decisions of firms.Among them,policy is an important manifestation of government resource allocation.If a firm can predict in advance the policies to be implemented by the government,it can take certain measures in advance to face policy changes.On the contrary,if it is difficult for a firm to predict the probability of a policy being implemented,it can only make judgments based on its own subjective consciousness,which indicates that this is the "policy uncertainty" faced by the enterprise.In recent years,it has become a hot research topic whether the uncertainty of policies will affect the capital decisions of firms.As important local policy makers,local government officials can directly or indirectly affect local enterprises to different degrees.The change of local government officials provides an appropriate framework for studying the impact of policy uncertainty on corporate capital decisions.In many countries,the timing of elections for leaders is set by the constitution and is not influenced by any individual or company.Since policy uncertainty may be higher when local leaders are replaced,it provides an appropriate environment for this paper to study the impact of policy uncertainty.In this paper,the author mainly studies the influence of the replacement of local government officials(mayor or party secretary)on corporate financing decisions(corporate debt financing).This article during the period of 2008 to 2015 by using the level city administration officials(the mayor and party secretary)as proxy variable of policy uncertainty,change events for the official change of all listed companies of the city as the research object,using the difference of test and multiple regression method to empirically the local administration officials replacement policy of uncertainty on the impact of corporate debt financing,at the same time introducing bank connection in order to explore its effect on the regulation of the main effect.Furthermore,political connection is also included in the research framework to discuss whether the moderating effect of political connection on main effect is similar to that of bank connection.In order to verify the conclusions of previous studies,this paper also takesthe source of new officials and the destination of outgoing officials as proxy variables for the intensity of policy uncertainty.In order to verify whether the policy uncertainty generated when the new official is transferred from another place or whether the outgoing official normally leaves office has an impact on corporate debt financing.The results show that the policy uncertainty caused by the change of local government officials(mayor or municipal party secretary)has a significant negative impact,and the bank connection has a positive regulating effect on the negative impact of policy uncertainty on corporate debt financing level.The impact of policy uncertainty on short-term debt financing of enterprises is greater than that on long-term debt financing of enterprises.The conclusion of the study demonstrates that enterprises face policy uncertainty,reduce their costs and reduce debt financing in order to avoid risks.However,as an important channel for enterprises to obtain resources,bank connection will weaken the inhibiting effect of policy uncertainty on corporate debt financing.The research conclusion not only enriches the related research on politics and economy macroscopically,but also supplements the related research on policy uncertainty and corporate debt financing microscopically.It provides a new perspective to understand the policy uncertainty caused by the change of local government officials(mayor or party secretary).