The Influence of Corporate Political Connections on Public and Private Debt Financing in the Emerging Market: Evidence from China

In emerging markets like China, government plays a vital role in corporate economic activities. In recent years, with equity issuance becoming increasingly difficult, debt financing accounts for a growing ratio in a company's asset and becoming more and more important for firms. Given all these factors, the research, which focuses on the effect of political connections on debt financing, will be of practical significance. Therefore, this paper takes the data of a-share listed companies in China from 2012 to 2020 as an example to discuss the influence of political connections on debt financing in emerging markets based on a fixed effects model. The research indicates corporate political connections can significantly facilitate public debt financing and do not have much influence on corporate private debt financing. Further analysis finds that political connections can facilitate corporate public and private debt financing more significantly in lower marketization regions. This research can help shed light on further market-oriented reform and debt market development for emerging countries that are under economic transformation, provides some suggestions for corporate decision makers to issue public debt financing and private debt financing.