Political connections in China: determinants and effects on firms’ exporting behaviour and financial health

[摘要] Using a comprehensive firm-level dataset from the National Bureau Statistics (NBS) of China over the period 2000-2007, this thesis studies political connections, intended as the \(lishu\) relationship between Chinese manufacturing firms and central, provincial or local governments. Although extensive studies have investigated firms’ political connections, the \(lishu\) relationship has not been explored. Besides, the literature has generally overlooked an important question: what are the determinants of political connections? To fill this gap, we firstly investigate the determinants of the \(lishu\) relationship. We find that firms’ characteristics, ownerships, financial variables, profitability, and sales growth significantly affect the probability of having a \(lishu\) relationship. We then examine the link between the \(lishu\) relationship and firms’ exporting propensity and intensity. By examining the unobserved firm heterogeneity and the initial conditions problem, we find that the \(lishu\) relationship has a negative impact on firms’ exporting. Furthermore, firm size, productivity, financial health and age are the significant determinants of firms’ exporting. Finally, we explore the links between the \(lishu\) relationship and financial constraints, demonstrating that firms’ financial constraints can be alleviated through a \(lishu\) relationship. This effect is pronounced for firms affiliated with high level of government, foreign firms and firms in financially constrained regions.

[发布机构] University:University of Birmingham;Department:Birmingham Business School, Department of Economics

[关键词] D History General and Old World;DS Asia