Can Political Connections Alleviate The Financing Constraints Of Small And Medium High-tech Enterprises In China?

In May 2016,the CPC Central Committee and the State Council issued the Outline of the National Innovation Driven Development Strategy,which emphasizing that as an important pillar,scientific and technological innovation capability increase social productivity and China's overall strength,and must be placed at the top of China's development layout.Under the "new normal" with rapid economic development,hightech enterprises are the main force in China's innovation and technology.They have not only improved people's quality of life and optimized the development of the national economy,but also further enhanced the country's overall strength in China's economic construction.The promenade plays an indispensable role.Different from traditional enterprises,there are three nature of the assets of small and medium-sized high-tech companies.The scale is relatively small,intangible assets are the main assets,and less assets are available for mortgage guarantees.In addition,these enterprises undertake greater R&D risks and market competition pressures.Therefore,it is difficult to obtain the external funds.Funds,as one of the indispensable elements in daily production and business activities,are also the boosters for sustainable development.Whether the company can obtain long-term and stable funding channels,and meet adequate funding requirements for daily production operations and strategic expansion are crucial.For this reason,this has also attracted many domestic and foreign scholars to pay attention to the issue of financing constraints for small and medium-sized high-tech companies,and has worked hard to provide constructive suggestions for the financing difficulties of such enterprises to help them develop soundly.Many scholars have found that the emergence of political connections in enterprises is a common phenomenon.Entrepreneurs frequently participate in political activities,including participating in election campaigns for members of the CPPCC National Committee and National People's Congress,attending symposia on business-to-business relations,and actively meeting government officials,as well as hiring employees with government agencies.Further research shows that the political background of entrepreneurs can alleviate the financing constraints of the enterprise.This type of research mainly focuses on private enterprises.Is there any more serious financing constraints for small and medium-sized high-tech companies? Can political linkages ease the financing constraints of small and medium-sized high-tech companies? Which mechanism is used to ease it? This article focuses on these issues in a series of analyses.Based on the characteristics of high-tech enterprises in China,guidelines for current IPO policies are superimposed.At present,China's small and medium-sized high-tech companies are mainly concentrated on the small and medium-sized board and the GEM.Therefore,this article takes a sample of small and medium-sized high-tech companies listed on the GEM and SME Board from 2007 to 2014.Considering the deficiency of the traditional model in the measure of financing constraints,this paper mainly refers to the random stochastic frontier model of Lian Yujun et al.(2009),which effectively solving the deficiencies of the traditional model from the quantitative and qualitative dimensions.Second,we can subdivide political associations at different levels and types,and divide political associations into four sub-projects: central political association,local political association,and chairman's political association and general manager's political association,to make in-depth discussions about the impact of different political associations for corporate financing constraints.Finally,from the perspective of external financing,the paper discusses the influence of the existence of political connections on short-term borrowings,long-term borrowings and government subsidies,and analyzes the specific channels through which political ties can ease the financing constraints of small and medium-sized high-tech companies.Through theoretical analysis and empirical test,the following conclusions are drawn: First,the IEI value of the investment efficiency index basically gathers between 0.6-0.8,and the IEI value of some companies is as high as more than 0.9.The average IEI value of small and medium-sized high-tech enterprises and their control groups and the results of the IEI difference T test show that China's small and medium-sized high-tech companies do have more serious financing constraints.Second,political linkages can ease the level of financing constraints of small and medium-sized high-tech companies by raising internal and external financing capabilities.The equations of financing uncertainty show that debt financing capacity increases the financing uncertainty of companies at a significant level of 1%,while equity financing has no significant effect on the uncertainty of financing;Third,by subdividing political associations of different levels and types,it finds that the political connections at the local level are significantly better than the political connections at the central level in enhancing the external financing capabilities of the company.The corresponding political connections of the chairman have clear advantages over the political connections of the general manager in enhancing the external financing capacity of the company.Fourthly,from the point of external financing,we can discover that political association can make the company more short period borrowings,long-term borrowings,and government grants to ease corporate financing constraints.