Political Connections and Bank Lines of Credit

Danglun Luo and Qianwei Ying

Emerging Markets Finance and Trade, 2014, vol. 50, issue S3, 5-21

Abstract: We analyze the companies listed on stock exchanges in China from 2004 to 2009 and discover that firms' political connections help them obtain bank lines of credit, especially from state-owned banks. The results also show that political connections have a stronger effect on the acquisition of bank lines of credit for firms that face more financing constraints, are not owned by the state, or are located in regions with intensive government intervention. This paper deepens the field's understanding not only of bank lines of credit but also of the role that political connections play in firms' financing activities.

Date: 2014
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DOI: 10.2753/REE1540-496X5003S301

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