An Empirical Research On Relevance Of Political Connection And Enterprise Value、Executive Pay

As an influential political relevance of the relationship between government and enterprises, political connection is in the world-wide presence. China is now in a period of economic transformation, legal, institution and many other issues remain to be improved, political connection just provides a bridge for building a relationship between enterprises and the government. Establishment of a political connection can bring a lot of corporate privileges and benefits, but also pay a considerable cost.Study abroad of political connection started relatively early, mainly through the event study and empirical research method, demonstrates the objective existence of political connection and the multiple effects in the business. In recent years, China’s study on political connection becomes more and more, usually research the link between political connection and enterprise performance in the perspective of private enterprises, but few researches pay attention to the different influences with different ownership property.This paper started with the definition of political connection and related theories, selected the A-share listed firms listed on the Shanghai and Shenzhen during the year 2007-2009, using the theoretical and empirical research methods to study the impact of political connection to the enterprise value and executive pay in the state-owned holding enterprises and non state-owned holding enterprises. The study indicates that, in terms of state-owned holding enterprises or non-state-owned holding enterprises, political connection will reduce enterprise value and enhance executive pay, which performs more obvious in the non-state-owned holding enterprises, meanwhile, as a political connection cost, executive pay plays a transmission role of relationship between political connection and enterprise value.This paper make a different conclusions from the previous’studies, and make a reasonable explanation for this difference, aims to help companies face up to the existence of political connection and apply it reasonable, thus provide value for the standardized operation of listed companies.