The Impact of Managerial Power on Financing Constraints

Abstract

With the increasing scale of enterprises, the demand for funds is also increasing, which makes enterprises must meet their own operation and management needs through financing. Based on the data of China's A-share listed companies from 2013 to 2020, this paper examines the impact of management power on corporate financing constraints. It is found that management power has a significant negative effect on financing constraints. The greater the management power, the smaller the financing constraints. This result is still valid after various stability tests. The marketization process has a negative moderating effect on the relationship between managerial power and financing constraints. The heterogeneity test finds that the management power of enterprises that do not choose the Big Four as audit institutions has a more obvious effect on financing constraints than those that choose the Big Four as audit institutions. The management power of enterprises with high equity balance has a more significant impact on financing constraints than those with low equity balance. The results of this study can provide suggestions for reducing corporate financing constraints.