POLITICAL CONNECTION AND FINANCING CONSTRAINTS: EVIDENCE FROM CHINESE PRIVATE LISTED FIRMS

摘要

Using a sample of Chinese A-share listed firms during 2004-2006, we adopt the method of multiple discriminant analysis and an empirical model of cash and cash flow, to investigate the present situation of financing constraints in China and examine the relationship between political connection and financing constraint. We find that the private firms face higher financing constraints than the state-owned enterprises, and the political connections of the private firms mitigate the extent of financing constraints. Moreover, the direct IPO private firms are more likely to be constrained than the indirect IPO private firms. Confined to the direct IPO private firms, those with tighter political connections suffer higher financing constraints. In contrast, indirect IPO private firms with political connections face lower financing constraints than those without political connections. The cash flow sensitivity of cash can provide an implementable test of the financial constraints hypothesis of Chinese listed firms.