Corporate Governance, Political Connection And Enterprise Performance

Political connection is a common phenomenon in many countries. Theestablishment of political connection has a certain impact on enterprise performance.Both political connection and enterprise performance were impacted by corporategovernance environment. This paper selects the private enterprises in2005-2011ofChina A-share market as research object, taking political connection as the core of thestudy, making research on relationship between corporate governance, politicalconnection and enterprise performance.The main conclusions of the study of this paper are: First, corporate governanceinfluence political connection. The improvement of the external governanceenvironment weakens political connection and the impact of the internal governancestructure is not obvious. Legal environment and market environment have obviouseffect on enterprise performance, government intervention has less affect. Second,corporate governance affect enterprise performance. The improvement in the externalgovernance environment has a weak impact on enterprise performance; theimprovement of the internal governance structure can improve enterprise performance.Third, political connection did not have a significant effect on the company’s overallperformance. Political connection has a negative impact on corporate profitability,short-term solvency, the subsequent development of capacity and ability to generatecash. Political connection has a positive impact on the company’s operating capacity andthe level of risk. Politics connection has on impact on the long-term solvency of theenterprise.The main conclusions of this paper are: First, the institutional environment has lessoverall impact on corporate political association. Legal environment and marketenvironmental impact is more obvious, and government intervention impact is less too.Second, the overall impact of the institutional environment affects firm performancesignificantly. In the external institutional environment, the improvement of the legal andmarket environment can significantly improve business performance, while the internalinstitutional environment has little impact on firm performance. Thirdly, the politicsassociated has no significant impact on the overall performance of the enterprise, but has considerable impact on refining performance. Political association has a negativeimpact on the profitability of the enterprise, short-term solvency, and the subsequentdevelopment of capacity and cash capacity; political association has a positive impacton the enterprise’s operational capacity and risk level; political association has noobvious impact on the long-term solvency of the enterprise.The study of this article shows that, corporate governance has impact on politicalconnection and enterprise performance. Political connection influences enterpriseperformance. The improvement of the corporate governance environment canundermine political connection and improve enterprise performance. The establishmentof political connection has positive impact on some aspects of enterprise performance.In this paper, we provide theoretical support for the Government to improve thecorporate governance environment, to weaken political connection and improveenterprise performance. This paper also provides theoretical support for the firm onpolitically connection selection.