In recent years, with the economic downward trend has been established, China's domestic regulatory authorities intend to implement a deleveraging policy (reduce the debt ratio of enterprises). To follow the requirements of new development concept and achieve the goal of more adequate and balanced high-quality development, based on the current China's economic situation, this paper made an empirical analysis of the real estate enterprises’ capital structure during the period from January 2013 to June 2018 (for six years), investment and financing risks from the perspective of political connections, so as to provide new ideas for enterprises in adjustment period.

The phenomena that firms with closer political connections are often featured with higher debt to assets ratio, or the so called “lobbying for leveraging”, is rarely investigated. In this paper, we contribute to the literature with the manually collected political connection data from 2013 to 2018, and find a higher leveraging from the closer connection in Chinese real estate developing business. That is, the political connection indeed has a large effect on shaping the capital structure. To discuss the black box of this effect, we further find that a better political connection can have a positive effect both on the access to the commercial loans and on lowering the interest rate, which could help explain the “lobbying for leveraging” phenomena. Moreover, we find the above effects are heterogeneous.