Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China

Political connection is one of the hotly debated global issues in financial economics in recent years. However, very few studies have focused on political connection and financial constraints in enterprises operating in different institutional environments. China is known for its unique institutiona...

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Main Author:	Hongbo, Duan
Format:	Thesis
Language:	eng eng
Published:	2012
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/3501/1/s93026.pdf https://etd.uum.edu.my/3501/8/s93026.pdf
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id	my-uum-etd.3501
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Chik, Abdul Razak
topic	HG Finance
spellingShingle	HG Finance Hongbo, Duan Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China
description	Political connection is one of the hotly debated global issues in financial economics in recent years. However, very few studies have focused on political connection and financial constraints in enterprises operating in different institutional environments. China is known for its unique institutional environment and unbalanced regional economic growth. China's economy is in transition to market economy. The transition is led by the Chinese government. It is important to examine how political connection plays its role in enterprises to reduce financial constraints especially for their business expansion in China. Hence, this study examines the relationship between institutional1 environment, political connection and financial constraints of private listed enterprises in China. This study uses a sample of 3, 911 private listed enterprises in Shanghai and Shenzhen Stock Exchange Market. The data is obtained from WIND and CSMAR database for the period of 2008-2011. Multiple regression models are used to provide answers to the research questions developed in this study. The results show the existence of political connection and strength of such connection has significant influence on reducing enterprises' financial constraints, Political connection helps private listed enterprises access to bank credits, reduce their financial constraints, expand their business enterprises and promote private economic development in China. The findings also show that institutional environment has a significant positive effect in reducing financial constraints. In addition, institutional environment is found to have a moderating effect on the relationship between political connection and financial constraints. The most important contribution of this study is it expands current knowledge on the effect of institutional environment and political connection on private enterprises' financial constraints. This has policy implications for future government initiatives in strengthening the regulations to restrict political connection in order to achieve transformation of government governance, development of financial market and improving the legal system in China.
format	Thesis
qualification_name	Ph.D.
qualification_level	Doctorate
author	Hongbo, Duan
author_facet	Hongbo, Duan
author_sort	Hongbo, Duan
title	Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China
title_short	Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China
title_full	Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China
title_fullStr	Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China
title_full_unstemmed	Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China
title_sort	institutional environment, political connection and financial constraints: evidence from private listed enterprises in china
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2012
url	https://etd.uum.edu.my/3501/1/s93026.pdf https://etd.uum.edu.my/3501/8/s93026.pdf
_version_	1747827587682402304
spelling	my-uum-etd.35012016-04-19T07:19:20Z Institutional Environment, Political Connection and Financial Constraints: Evidence from Private Listed Enterprises in China 2012-11 Hongbo, Duan Chik, Abdul Razak Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance Political connection is one of the hotly debated global issues in financial economics in recent years. However, very few studies have focused on political connection and financial constraints in enterprises operating in different institutional environments. China is known for its unique institutional environment and unbalanced regional economic growth. China's economy is in transition to market economy. The transition is led by the Chinese government. It is important to examine how political connection plays its role in enterprises to reduce financial constraints especially for their business expansion in China. Hence, this study examines the relationship between institutional1 environment, political connection and financial constraints of private listed enterprises in China. This study uses a sample of 3, 911 private listed enterprises in Shanghai and Shenzhen Stock Exchange Market. The data is obtained from WIND and CSMAR database for the period of 2008-2011. Multiple regression models are used to provide answers to the research questions developed in this study. The results show the existence of political connection and strength of such connection has significant influence on reducing enterprises' financial constraints, Political connection helps private listed enterprises access to bank credits, reduce their financial constraints, expand their business enterprises and promote private economic development in China. The findings also show that institutional environment has a significant positive effect in reducing financial constraints. In addition, institutional environment is found to have a moderating effect on the relationship between political connection and financial constraints. The most important contribution of this study is it expands current knowledge on the effect of institutional environment and political connection on private enterprises' financial constraints. This has policy implications for future government initiatives in strengthening the regulations to restrict political connection in order to achieve transformation of government governance, development of financial market and improving the legal system in China. 2012-11 Thesis https://etd.uum.edu.my/3501/ https://etd.uum.edu.my/3501/1/s93026.pdf text eng validuser https://etd.uum.edu.my/3501/8/s93026.pdf text eng public Ph.D. doctoral Universiti Utara Malaysia Acemoglu, D. & Johnson, S. (2005). Unbundling Institutions. Journal of Political Economy; 113, 949-995. Adhikari, A., Derashid, C., & Zhang, H. (2009). 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