The Effect Of Political Connections On Bank Credit Decisions In Different Legal Environments

At present,due to the increasingly fierce market competition,under the imperfect market and legal system,the private entrepreneurs are actively building links with the government to close the relationship between enterprises and the government to obtain key resources and opportunities.Based on the rent-seeking theory,social capital theory,information asymmetry theory,signaling theory and resource dependence theory.We empirically examines the impacts of entrepreneurs' political connections and state-owned equity on the bank credit intensity of private enterprises by using fixed-effect model.We further explores the impacts of entrepreneurs' political connections and state-owned equity on the bank credit intensity of private enterprises under the different levels of legal environment and different levels of economic development.The research shows that,on the whole,the political connection of private entrepreneurs increases the bank long-term credit intensity and total credit intensity,and the state-owned equity of private enterprises can also increase the bank long-term credit intensity and total credit intensity.In provinces with a backward legal environment,private enterprises are more likely to use political connections to obtain long-term loans and total loans from banks;in provinces with better legal environment,state-owned equity of private enterprises helps private enterprises to obtain long-term loans and total loans.State-owned equity establishes a direct interest relationship between private enterprises and the government,and the relationship is closer than that of entrepreneurs.The introduction of state-owned equity into private enterprises can diversify the main body of capital investment,benefit the development and growth of enterprises and improve the operational efficiency and standardized management level of enterprises.Where the legal environment is weak,it is easier to breed rent-seeking and corruption,which means that the individual's personal political connection can better play the role of accessing key resources.Similarly,in provinces with high level of economic development,state-owned equity can also increase the intensity of long-term loans and total loans obtained by banks;in provinces with poor level of economic development,entrepreneurs' personal political connections can help enterprises enhance the intensity of long-term loans and total loans obtained by banks.