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Political connections of the board of directors and credit financing: evidence from Chinese private enterprises

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  • Hongfeng Peng
  • Xiao Zhang
  • Xiaoquan Zhu

Abstract

This study explores whether the political connections of the board of directors facilitate credit financing. It addresses the gap concerning the discussion of the substitution or complementary effect on financing terms between political connections and government regulation in China. Using a data set covering 1340 private listed firms, we classify all members on the board of directors into subgroups and show that it is the political connections of nonexecutive directors, rather than executive directors that play an important role in obtaining long‐term credit loans. Moreover, the convenience of obtaining financing is mainly derived from the political connections of official independent directors.

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  • Hongfeng Peng & Xiao Zhang & Xiaoquan Zhu, 2017. "Political connections of the board of directors and credit financing: evidence from Chinese private enterprises," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(5), pages 1481-1516, December.
    • Handle: RePEc:bla:acctfi:v:57:y:2017:i:5:p:1481-1516
    DOI: 10.1111/acfi.12331
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