Study On Red-Gene Of Private Enterprises And Corporate Finance

Since the reform and opening up policy implementation,China’s economy has grown rapidly for nearly four decades,and made remarkable achievements worldwide.However,these achievements of the reform do not depend entirely on the guarantee of formal legal and finance systems.Rooted in China’s special conditions,a set of unique informal mechanisms also plays an important role.Culture as one of the key components in informal mechanisms has become an important factor for domestic and foreign scholars to interpret the puzzle of China’s economic development.The existing literature mainly examines the cultural genes in the economic operation of China from the traditional cultural perspectives including religion,clan and Confucianism,and has achieved abundant research results.But in addition to the traditional culture,there is a red culture which has developed in the recent century and greatly influenced the development of Chinese history.However,it is regretful that the research based on the red culture perspective in the existing literature is still quite scarce.This study,to my best knowledge is the first one that based on the specific cultural situation in China,introduces the red culture into the research field of corporate financial behavior.It aims to provide new experience for understanding the operating principles of China’s micro economy.More importantly,this study tries to fully understand the importance of red culture in the process of the evolution of China’s history and provide support with direct evidence.Specifically,from the three dimensions of the red cultural background(Communist Party Membership),the red culture mark(the Party Organization)and the macro red cultural environment(the Old Revolutionary Area),this dissertation constructs a red cultural index system with clear hierarchy and comprehensive system.Based on this,I built a systematic analysis framework for the study of red culture and corporate financial behavior.I choose Chinese A-share private non-financial listed companies during 2007—2016 as the research sample.The analysis is threefold.First,I analyze the inhibiting influence of the membership of the board chairman on the illegal activities of the enterprise.Second,I examine the role of the party organization governance in reducing the compensation gap between the managers and employees.Third,I test the promoting effect of red cultural environment in the enterprise registration area on enterprises social responsibilities(charitable donations).The main conclusions of this paper are as follows:First,the red culture reflected in the board chairman’s party membership can inhibit enterprise fraud.Overall the identity of party members has a significant impact on the decision of the chairman’s violation.That is,compared to non-party chairman,the chairman with party membership identified is less likely to violate the rules and the degree of violation is lighter.Further,this dissertation finds such inhibiting influence of chairman identity is significantly different due to legal environment,operating pressure,and the identity of the board chairman.(1)Chairman’s party membership can inhibit the enterprise fraud,and the effect is stronger for the enterprises locate in areas with weak legal protection.(2)The function of Party member of chairman will be weakened when the enterprise is under financial pressure.In such situation,chairman is more motivated to whitewash company’s performance through the violation,which results a weakened inhibitory effect on enterprise fraud.(3)Chairman’s industry identity can promote party member identity.Compared with other private enterprises,the possibility of illegal behavior is smaller and the degree of violation is lighter.Lastly,I examine the mechanism of party membership which improves corporate governance through the Party Organizations participation in corporate governance and thus curbs corporate irregularities.Second,the red culture reflected in the Party organizations can alleviate internal compensation gap of enterprises.Overall,compared to non-party organization private enterprises,the compensation gap within the enterprise under Party organization is smaller.Further,this dissertation finds the effect of Party organization on the internal compensation gap in enterprises is different due to the role of Party organization,the way of establishing party organization and the characteristics of the industry.(1)The governance of Party organization has significantly reduced the internal compensation gap where the chairman is responsible for the Party organization.(2)The Party organization,which is established spontaneously by private enterprises,plays a tremendous role in alleviating the internal compensation gap,but the effect is not obvious in enterprises where Party organization exists only because of the reform of state-owned enterprises.(3)Compared with high-tech enterprises,Party organizations in traditional industries have a more significant impact on internal compensation gap.Lastly,to investigate the mechanism of Party organization by managing members,this dissertation finds that the party organization has an impact on the internal compensation gap through its members in the management of the enterprise.Third,the red culture reflected in the old revolutionary areas can promote corporate charitable donations.Overall,there is a significant positive correlation between the location of the old revolutionary areas of private enterprises and the charity donation.That is,compared to the private enterprises in the non-revolutionary old areas,enterprises located in the old revolutionary areas are more inclined to engage in charitable donation activities,and the scale of charity donation is also larger.Further,this dissertation finds that the influence of the old revolutionary area on the corporate charitable donation is significantly different due to the market level,type of industry and operating pressure in the area where the enterprises are located.(1)That is,the red culture of the old revolutionary areas promotes the charity donation for enterprises that are located in areas with better market condition.Such effect is not obvious in poor market environment.(2)The charitable donation of the revolutionary old areas is different based on industries.The effect is more obvious in enterprises which are more conversant to consumers.(3)The operating pressure of enterprises will affect the role of charitable effect of red culture.That is,the charitable effect of the red culture is not obvious in the enterprises with poor performance.Lastly,to choose the childhood experience of the chairman of the revolutionary old area as an inspection perspective,to verify the way red culture is influenced by the decision-making role of the manager in the enterprise’s charitable donation strategy.The main innovations of this paper are as follows:First of all,in research content,this dissertation is the first one that introduces the red culture to academic research in the field of finance,and tries to extract the red culture which is the mainstream of Chinese social revolution.It constructs from three aspects including "communist party identity","enterprise party organization" and"revolutionary old area".This is not only the first attempt to introduce the red culture research in the context of China,but also opens up a new way to explore the financial behavior of Chinese market from a broader perspective.Secondly,from research field perspective,this dissertation enriches the connotation of "culture and finance".There has been a long history to study corporate financial behavior from a cultural perspective,but the study of cultural factors based on Chinese context just commences.At present,the research on traditional culture is concentrated at the macro level of country and region,and the research on the micro level is relatively insufficient.The main reason is due to the fact that it is difficult to measure the cultural factors of micro enterprises effectively.This paper extracts red culture with similar characteristics from three levels as management individual,micro enterprise and macro area environment,and constructs a clear metric index,which makes the research of red culture in enterprises more specific.Finally,in the perspective of research angle,this dissertation explains the phenomenon of sustained development of China’s economy on the background of imperfect formal system.The western economics theory holds that the formal system,such as perfect legal system and free financial market,is the essence for economic development.But Chinese economy has achieved rapid growth for nearly four decades without such fine system,within which the non-positive institutional factors of culture play an important role.Through the direct entry into the cognition,interaction and decision-making of enterprise managers,culture affects the management strategy in a subtle way,and becomes the restrictive factor other than legal system influencing the business activities.It provides a unique perspective to understand the economic development pattern of China’s transitional economies.