The roles of political connections in financing: Evidence from software vs. manufacturing listed firms from China

We relate capital structure of software vs. manufacturing listed companies in China to a more detailed measurement of political connections than the literature and document two main empirical regularities. We find both the software and manufacturing firms have the equity financing preference and the manufacturing firms even have more pronounced equity financing preference. This challenges the previous literature. Moreover, we find that that the political connections of the software firms facilitate the short-term debt financing, while those of the manufacturing firms promote equity and long-term debt financing.