Research On The Relationship Between Political Connection And Financing Constraints

Whether in developed or developing countries,the operation and development of enterprises will inevitably be affected by government behavior and political factors,China is no exception.As a transitional economy in the period of deepening market-oriented reform,after more than 40 years of reform and opening-up,although the Chinese government has constantly stimulated market vitality,simplified government and decentralized power,and reduced interference in the allocation of social and economic resources,it still has a significant impact on some important economic resources,and even has direct control over them.Financial capital is one of them.As the lifeblood of national economy,finance plays an important role in the stable operation of a country's economy and even in the stable development of the whole society.After the founding of New China,the economic policy of giving priority to the development of heavy industry has been implemented for a long time.The matching financial system is the banking system with large state-owned commercial banks as the absolute main body.After the reform and opening up,the traditional state-owned banks take the lead in the development of the financial market and gain competitive advantage by virtue of their long-established links with industrial and commercial enterprises and the huge number of outlets throughout the country.Therefore,due to historical factors,China's current financial structure is still dominated by large state-owned commercial banks.In the capital market,although the bond market and stock market have achieved a certain degree of development,they still lag far behind the bank credit market in the scale of assets.For the sake of stabilizing the market and protecting the national economic security,the government also considers that the technical complexity and legal difficulty of the supervision of bond and stock markets far exceed that of the banking industry.These two reasons also prevent other types of financial institutions and businesses from expanding rapidly in the short term.Therefore,the dominant financial structure of China's state-owned commercial banks will not change dramatically in the short term.Although the causes of the current financial structure are reasonable,one of its obvious defects is that it makes it difficult to solve the financing difficulties of private enterprises.At the same time,the vast majority of private entrepreneurs are seeking to establish political connections.The main ways include:entrepreneurs strive to be NPC deputies and CPPCC members,and employ former government officials to serve in enterprises.Chinese scholars have done a lot of research on this phenomenon,and found that the first advantage of establishing political connections for private enterprises is to improve the financing convenience.That is to say,in the case that the financing plight of private enterprises can not be changed in a short period of time,out of the instinct of survival and development,private enterprises have found an alternative mechanism to ease financing constraints outside the formal system,and to some extent,the alternative mechanism of establishing political connections is "effective".It should be recognized that the responsibility of entrepreneurs lies in providing products and services and creating profits for enterprises.To find and maintain political relations in addition to the operation of enterprises will result in a certain degree of waste and inefficient allocation of social resources.However,this phenomenon is very common in China.Therefore,this issue deserves attention and research.This paper chooses China's private listed companies from 2008 to 2015 as the research object.On the basis of collecting the political and financial data of various enterprises,after reading a large number of domestic and foreign related literature,it chooses the fixed effect model to make an empirical analysis of the relationship between political linkages and financing constraints.At the same time,from the two perspectives of information asymmetry and rent-seeking,this paper makes a theoretical analysis of the mechanism of political connection to reduce financing constraints.Finally,we draw the conclusion that there is a significant negative correlation between local-level political connections and financing constraints,and this negative correlation is the largest among enterprises in recession.The innovation of this paper lies in:first,the collection of political related information is more comprehensive.The political association information collected by predecessors comes from the CSMAR database.The political association information in this paper comes from the CSMAR database,WIND database and search engine search.Secondly,the role of political association is viewed from a dynamic perspective.The predecessors believed that the role of political connection remained vunchanged throughout the lifetime of enterprises.This paper divides enterprises into growth period,maturity period and recession period,and studies the role of political connection in each life cycle separately,and compares its differences.