The Influence Of Political Connection On Financing Constraints Of Middle And Small-sized Enterprises

Because of the low development of the capital market,the imperfect legal system,and the limited level of their own development,financing constraints become the common problems faced by small and medium-sized enterprises.The existence of financing constraints reduce the ability of small and medium-sized enterprises to grasp investment opportunities and create economic value.And also hinder their healthy development.And this phenomenon appears more outstanding to our country in the period of economic transition.Due to the current government still controls the important resources which can affect the enterprises' survival and development,and have significant power of market allocation,thus to build political connection has become an important means to relieve financing constraints of smes.At the same time,improving the financial system and developing the financial market is the key to the government to solve the problem of financing difficulty,and the reform of interest rate liberalization is an important part of improving our financial system.This paper selects the political connection as an important factor that affect the financing constraints.According to the way of establishment,political connection was divided into two categories:government officials and representative committee.Interest rate liberalization is also introduced as the adjustment variable.The data of China's smes listed on the sme board from 2013 to 2015 were used,and the SPSS data analysis tool was used.Using multiple linear regression analysis method to explore the influence of different types of political connections on financing constraints of smes,and examine the regulatory role of interest rate liberalization in the process of political connection influencing financing constraints.The main conclusions are as follows:The political connection has alleviated the financing constraints of small and medium-sized enterprises.Empirical study shows that politically connected enterprises have weak investment-cash flow sensitivity than others which have no political connection,this suggests that politically connected enterprises exist obvious advantage in external financing,financing constraints be mitigated.Therefore,smes will seek to establish political connections with government officials or government agencies in order to alleviate their constraints and restrictions in resource allocation.The representative political connection is more important than the government political connection to alleviate the financing constraint.Different types of political connection of small and medium-sized enterprise have different influnce on reliving financing constraints.Representative political connection can provide a greater implicit guarantee for corporate performance,contribution and reputation,which are more reliable and stable.Therefore,it is more likely to help enterprises to achieve good business performance and to alleviate the financing constraints.The interest rate liberalization is beneficial to ease the financing constraints of small and medium-sized enterprises,and can produce substitute for the political connection.With the increase of interest rate liberalization level,caused the marketization of credit resource allocation,enterprise will cause less reliance on the government,so as to ease the financing constraints of small and medium-sized enterprise.It is a kind of effective formal mechanism.The higher level of interest rate liberalization,the smaller impact of political connection when financing,Interest rate liberalization plays a negative role in regulating the relationship between governmental and representative political connection and financing constraints of small and medium-sized enterprises.This article expand and deepen the informal and formal mechanism in the transition economies substitute mutually affect corporate financing activities of related research,has been clear about the different types of political connection as an enterprise in the development of non-market strategy choice in alleviating the financing constraints of the role of,and interest rate liberalization in political connection influence role in the process of financing constraints.It provides theoretical support for the relief of financing constraint problems of smes in China and provides reasonable and effective Suggestions for the establishment of relevant policies and systems.