Political Connections and Loan Availability: Evidence From Chinese Private Firms

Facing financial difficulties, Chinese private enterprises try to use a variety of channels to solve the problem of accessibility to capital. Among them, the establishment of political connection is an important means. Through the political connections, private enterprises seek to enhance corporate reputation and strengthen relations between banks and enterprises. Therefore, the availability of loans will be enhanced. This paper is based on the background of credit discrimination against the private enterprises and selects all mainland-listed private enterprises from 2005 to 2011. From the point of view of political connections, this paper studies the availability of loans for private enterprises. The results show that the political connections make a significant contribution to the availability of private enterprises and that the higher political connections are the more significant availability of loans will be.