The organizational relationship-based political connection and debt financing: Evidence from Chinese private firms

Given the existing literatures of political connection's effect on debt financing that mainly focus on the interpersonal relationship-based political connection, this study investigated how organizational relationship-based political connection (OPC, established by corporate party organization) influence private firms' debt financing in China. With 11,061 firm-year observations of China's A-shared listed private firms between 2010 and 2017, we found that OPC has a significantly positive effect on private firms' debt financing. Moreover, this effect is weakened in regions with better developed institutional environments, whereas strengthened when the firms are supported by the industrial policy. This study advances our understanding of the connotation of political connections and provides a new perspective for investigating determinants of private firms' debt financing in the context of an emerging economy.