| In2010, real estate investment took up over13%of China’s GDP, becoming adominant part in domestic economy. As a classical capital intensive industry, more than50%of capital in real estate companies is from bank debt. Currently, China is in the stageof transition economy and the local government plays a significant role in allocatingmarket resources, such as capital, land and subsidies. It has been researched that real estatecompanies can obtain capital resources through building close connection with the localgovernment. Meanwhile, the companies help the government to develop economy,improve employment and add up fiscal revenues. The main purpose of this paper is tostudy the relationship between political connection and financing effect based on themutually beneficial mechanism.This paper will select63listed real estate companies from Shanghai and Shenzhenexchanges from2005to2011,441observations totally. Then it will resort to EVIEWS totake empirical analysis. At first, it will divide political connection into five typesaccording to two standards. Then the empirical analysis will make regressions separatelyon these five types of political connections. The financing effects will be presented bythree main indicators, which are financing quantity, maturity and cost respectively. Wefind out that political connection in real estate companies will produce positive financingeffect, but it is only tested significantly in the private samples. Moreover, three types ofpolitical connection with different working background have produced various effects.Among them, the second type is acting the most significantly. As for another standard, thefirst type brings more significant effect. Finally, it is surprised that the significance level ofpolitical connection has differed after the financial crisis. In terms of the state-owned realestate companies, their significance has declined while those for private ones have been inthe contrast. |
