How Do Political Relations Affect State-Owned Bank Loans?

Political relation refers to the interactive process between the political and economic markets and generally exists worldwide. Numerous people who engage in political relations obtain loans for large sums of money from financial institutions by exerting political power. When different political parties are in power, many enterprises obtain political and economic privileges through political investments as well as successfully acquire allocated funds from financial institutions through the networks of politicians. The empirical results indicated that, during the period when Kuomintang was in power, enterprises with political relations had a higher chance of obtaining loans from state-owned banks, whereas when the Democratic Progressive Party was in power, such enterprises had a lower likelihood of acquiring loans from state-owned banks. In other words, when the Kuomintang was in power, enterprises favoring the Kuomintang had few chances of obtaining loans from state-owned banks.