The Study On The Influence Of Political Connections To The Debt Maturity Structure Of Private Enterprises

Debt maturity structure theories show that in imperfect capital markets, debt maturity structure indeed influences firm value. After years of development, China's private enterprises have become an important part of national economy. However, it has always been a difficulty for private firms to finance debt funds, debt maturity structure is in state of serious imbalance, the ratio of short-term debt is too high, while the proportion of long-term debt is too low, it inevitably causes a negative impact to private firm value. Political connection is an alternative mechanism of formal system, it has attracted academic attention. In China, legal system is inadequate, financial institutions have a discriminative credit attitude to private firms, whether political connections can serve as an effective alternative mechanism to help private enterprises out of financing difficulties, optimizing the debt maturity structure, this paper conducts empirical study.First, this paper analyzes the external factors which can influence private firm debt maturity structure, uses actual data for statistical analysis to reveal the current imbalance state of private firm debt maturity structure. Then analyzes the impact of political connections and the reasons for the discrepancies, proposes research hypothetical based on these theoretical analysis. At last conducts empirical study on the influence of political connections to private firm debt maturity structure. This paper selects all the listed 495 non-financial private enterprises in 2002-2007 as the research object (including newly listed private firms during this period), removed ST, *ST, data incomplete enterprises and finally obtains 1811 annual observations. This paper chooses the proportion of long-term debt as variable of debt maturity structure, and chooses control variables based on classical debt maturity theories, then establishes multiple regression models and provides the empirical examination. Correlation analysis, T test and other methods are used during the study.The main conclusions are shown as follows:(1) Political connection is an important factor influencing debt maturity structure of private enterprises. The long-term debt ratio of corporations with political connections is significantly higher than non-political relations firms, political connections can help private enterprises to obtain bank credit support, especially long-term credit support.(2) The influences of political connections are variable. Affected by regional institutional environment constraints, in financial or legal relatively backward areas, political connection has greater affection to maturity structure; The significance of affection is also closely related to the specific characteristics of political connections, compared with central political connection, local connection can play a greater role.This paper also provides verification to the classical debt maturity structure theories in considering the premise of political connections. The outcome shows that size and capital structure of private firms have positive affections to debt maturity structure. China's private enterprises do not regard tax shield effect as a major consideration when determining debt structure, the affect of real tax rate is not notable; Enterprise quality has a significant positive impact. Study results support firm size and capital matching theories, the tax and signal theories are not verified.