Political Ties, Soft Budget Constraints And Firm Performance

This paper established a theoretical model, examines the political connections and enterprise's Soft Budget Constraint problems, and private listed companies in China as the research object, the actual controller and board members of different degree and the types of political ties to enterprise Soft Budget Constraint, corporation performance and corporation value influence.In this paper in February 2010 Shanghai and Shenzhen stock exchange in China before 604 listed on the main home as the sample private listed companies, the ultimate control by manually collecting and background information of board members, will these companies into strong political connections company, weak political connections company and no political connections company, and financing convenience, the tax burden on indicators to measure sample companies such as the Soft Budget Constraint degree, with profitability, staff hiring efficiency measure firm performance. Study found that different degree of political connections, the enterprise the above the parameters influence the workings are different. The stronger political connections the company more easily obtained financing convenience and tax incentives and other benefits, but must pay the cost of hiring more workers, and the stronger political connections the company's enterprise value is higher also, however, this article is not found on the company profitability political connections have significant influences.For further research on different kinds of enterprise political connections Soft Budget Constraint, company performance and corporation value influence, the paper will be divided into political connections with the central government has central government political connections, local governments political connections, National People's Congress political connections, and political connections of local People's Congress committee. Research found that, compared with the political and the central government, and the local government has linked political contact easier for enterprise to bring the financing facilities, but should be with lower profit ability for a price; Compared to the National People's Congress or political consultative conference with a political affiliation with the place National People's Congress or political consultative conference, a political contact easier for enterprise to bring the preferential tax benefits, and the company will have higher value.