Political Connection, Accounting Conservatism And Perferential Lending Of Private Enterprises

In this paper, we use empirical methods and combined with the necessary theoretical explanations and select the listed private enterprises in China from2004to2010for the study sample, and choose the proportion of short-term loans and long-term loans to total assets as a preferential lending alternative variable, in order to observe and study that it is for the bank that how to choose the accounting conservatism and political relations between the characteristics of the enterprise in the course of determining the amount of private enterprise loans and interest rate. Specifically, this article examined the impact of the political relations and accounting conservatism on the financing of private enterprises, as well as accounting conservatism and political relations play when both exist, the effect of preferential lending.This article find that private enterprises with political relations have an advantage on preferential lending than the private enterprises with no political relations,which means that the political relations can take an advantage on the loan for private enterprises, however, we find the role of the accounting conservatism weakened by the political relations of private enterprises. That is to say, accounting conservatism bellower in the private enterprise of political associated on the whole. On the other hand, the private enterprises with lower accounting conservatism compared to enterprises with higher are much easier to obtain loan deals, in the way, the private enterprises with lower accounting conservatism may pay higher interest rate or shorter loan period.In addition, research show that under the premise of considering the political relations, it is much easer for the private enterprises with higher accounting conservatism to obtain loan, These results suggest that creditors in the face of accounting conservatism enterprise, regardless of whether it has the political relations, will usually be more timely to get the default signal facing of uncertain conflict condition. Which to some extent reduce creditor risk. As a result, we find that sound accounting information contribute to protect the interests of creditors, reduce creditors’ expectations of default risk and debt compensation costs, so as to provide the debtor of the soundness of the accounting information, under the same conditions, the higher accounting conservatism company more beneficial to its convenient access to finance.In this stage, it is that the bank loan financing is still an important source of financing for private enterprise channels, how to get through the low-cost high financing support for private enterprise to expand productivity, improve capital chain, as well as to improve the market competitiveness of the enterprise as a whole, have very important significance. Based on the conclusions of this study, we find that the political relations in a way indeed provided financing for private enterprise support facilitates. However, controlling the variable of political relations, we find that strong accounting conservatism still play promote the role on the financing of private enterprises, therefore, the management need to formulate the prudent accounting policy, and keep a more conservative estimate of surplus, and accord to affirm the loss, although it may be slightly inferior to the financial performance of enterprises in the capital markets, indirectly be enable to meet the banks to examine the standard in the credit process, so as to obtain the preferential interest rates of bank loans. Thus, to some extent, it is an effective way to a modest improvement of accounting conservatism for enterprises to obtain bank loans to support.