The Empirical Study On The Influence Of Political Connections To The Private Companies' Debt Maturity Structure

Private listed companies generally face financing difficulties, because the special system background of China, corporate finance mainly through bank loans. At present most of banks and other financial institutions, directly or indirectly, control or charge of the intervention by the state, If the companies establish contacts with the government as a political affiliates, they can get more loans, and the reputation of political association is a mechanism to guarantee the credibility of enterprises, so, political connections firms can gain more bank loans. Therefore, we can speculate that the political association will affect the debt maturity structure of private listed companies. In addition, the degree of market in different regions is not the same, what is the difference for the political connections of debt maturity in respect of the different market level? These are issues worthy of discussing.Considering China's institutional background, the thesis theoretically deduces the influence of political connections on debt maturity structure of listed company. Controlling related variables, this paper adopts cross-sectional data of 489 non-financial companies)that listed in Shenzhen and Shanghai stock exchange in 2006-2008,removed ST, PT, data incomplete enterprises and finally obtains 1299 annual observations. Manual collection of biographical notes and executive positions on the CEO, judging whether a firm is political connected by checking if the managers(including chairman of the board, general manager and other members of the board, etc)are former or current officers, the representives of the National People's Congress, members of Chinese People's Political Consultative Conference, and applies series of OLS, parametric and non-parametric test to empirically examine how political connection affect firm's debt maturity structure. The empirical evidence provided by the paper shows that political connections do affect firm's debt maturity structure. To be specific:(1) comparing with firms without political connections, firms with political connections are easier to obtain longer debt financing maturity; that shows the political connections as an informal mechanism to help private enterprises to get more long-term debt, to improve corporate debt maturity structure. (2) Divided political connections into local and central political connections, we find that local political connections impact of debt maturity structure is greater than the central political connections. (3) Divided political connections into inner director and independent director political connections, we find that both of them did no different on the impact of debt maturity structure. (4) Divided political connections into former and current political connections, we find that former political connections impact of debt maturity structure is greater than the current political connections. (5) Add to the differences in the degree of market, the lower of market areas, the political connections did greater impact on debt maturity structure, and that shows in the lower level market areas, Financial market is underdeveloped, legal system is not perfect, government intervention is serious, the political connections as an informal mechanism impact debt maturity structure even more.