The Relationship Between Financial Connections and Business Performance of Private Enterprises: Evidence from Chinese Listed Firms
International Journal of Economics, Finance and Management Sciences
Volume 7, Issue 1, February 2019, Pages: 29-36
Received: Jan. 10, 2019; Accepted: Mar. 12, 2019; Published: Mar. 29, 2019
Views 209      Downloads 76
Authors
Zhuwei Li, Faculty of Management and Economics, Dalian University of Technology, Dalian, China
Sennan Liu, Faculty of Management and Economics, Dalian University of Technology, Dalian, China
Shunyao Wang, Faculty of Management and Economics, Dalian University of Technology, Dalian, China
Baolu Wang, Faculty of Management and Economics, Dalian University of Technology, Dalian, China
Article Tools
Follow on us
Abstract
Sample data were acquired from Chinese listed private enterprises. Then, the random effect model of panel data was used to establish a regression model of business performance and firm financial connection and examine the relationship between them. Results showed that the higher the degree of private enterprise financial connection, the worse the business performance of the enterprise. In other words, financial connection provides financing convenience, but it cannot improve business efficiency. We also classified the sample enterprises according to size and found that financial connection has a greater negative impact on the performance of small-scale firms compared with large-scale ones. Moreover, dividing the sample enterprises according to the degree of financial marketization in the location of the sample enterprises indicated that financial connection has a negative effect on the performance of private enterprises in areas with low degree of financial marketization. The classification of financial connection also revealed that non-bank financial connection exerts a greater negative impact on corporate performance than bank financial connection.
Keywords
Financial Connection, Business Performance, Private Enterprise, Panel Data
To cite this article
Zhuwei Li, Sennan Liu, Shunyao Wang, Baolu Wang, The Relationship Between Financial Connections and Business Performance of Private Enterprises: Evidence from Chinese Listed Firms, International Journal of Economics, Finance and Management Sciences. Vol. 7, No. 1, 2019, pp. 29-36. doi: 10.11648/j.ijefm.20190701.16
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Cull R., L. X. C. Xu. (2005). Institutions, Ownership and Finance: The Determinants of Profit Reinvestment among Chinese Firms. Journal of Financial Economics. 77(1): 117-146.
[2]
Jovanovic B. (1982). Selection and the Evolution of Industry. Econometrica. 50(3): 649-670.
[3]
Fung M. K. (2014). R&D, knowledge spillovers and stock volatility. Accounting & Finance. 46(1): 107-124.
[4]
Francis B. B., I. Hasan. and X. Sun. (2009). Political connections and the process of going public: Evidence from China. Journal of International Money and Finance. 28(4): 696-719.
[5]
Dhawan R. (2001). Firm size and productivity differential: theory and evidence from a panel of US firms. Journal of Economic Behavior & Organization. 44(3): 269-293.
[6]
Rajan G. R., L. Zingales. (1998). Financial Dependence and Growth. The American Economic Review. 88(3): 559-586.
[7]
Salim M., R. Yadav. (2012). Capital Structure and Firm Performance: Evidence from Malaysian Listed Companies. Procedia - Social and Behavioral Sciences. 65(3): 156-166.
[8]
Vu M. C., T. T. Phan, N. T. Le. (2018). Relationship between board ownership structure and firm financial performance in transitional economy: The case of Vietnam. Research in International Business and Finance. 45: 512-528.
[9]
Jiang K., S. Wang. (2009). Firms in Economic Distress: Survival Strategies and Economic Factors. Ssrn Electronic Journal.
[10]
Blau B. M., T. J. Brough and D. W. Thomas et al. (2013). Corporate lobbying, political connections, and the bailout of banks. Journal of Banking & Finance. 37(8): 3007-3017.
[11]
Huang Q., F. Jiang. E. Lie. et al. (2014). The role of investment banker directors in M&A. Journal of Financial Economics. 112 (2): 269-286.
[12]
Chan C. C., B. H. Lin., Y. H. Chang et al. (2013). Does bank relationship matter for corporate risk-taking? Evidence from listed firms in Taiwan. North American Journal of Economics and Finance. 26: 323-338.
[13]
Luo W., Y. Zhang., N. Zhu. (2011). Bank ownership and executive perquisites: New evidence from an emerging market. Journal of Corporate Finance. 17(2): 352-370.
[14]
Higgins H. N. (2013). Conflicts of interest between banks and firms: Evidence from Japanese mergers. Pacific-Basin Finance Journal.
[15]
Güner B., U. Malmendier, G. Tate. (2008). Financial expertise of directors. Journal of Financial Economics 88(2), 323-354.
[16]
Kang, M. J. and Kim, A. (2017), Bankers on the Board and CEO Incentives. Eur Financial Management 23(2). 292-324.
[17]
Houston J. F., L. L. Jiang., C. Lin et al. (2014). Political connections and the cost of bank loans. Journal of Accounting Research. 52(1): 193-243.
[18]
Leonard K. 2015. Political capital and moral hazard. Journal of Financial Economics. 116(1): 144-159.
[19]
Cebeci U., B. Sezerel. (2008). Performance evaluation model for R&D department: An integrated balanced scorecard and analytical hierarchy process approach. 2008 3rd international conference on intelligent system and knowledge engineering. 1276-1281.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186