Research On Relationship Between Political Identity Of Business Controller And Financial Risk Based On Chinese Private Listed Companies Of Science And Technology

Reforming and opening up for more than30years. The private economy has become animportant part of China’s economy system. It is no doubt that in such an institutionalenvironment to be further improved in China, politics, government resources are effectiveresources for enterprise development. Compared to the innate political resources andadvantages which the state run enterprises has, privates enterprise also show the features ofcombines in political and business during the development process.In real market, we often found that a private enterprise with government background iseasier to obtain loans from banks more often than private enterprises which do not have thisfeature. Enterprises which have government background or political clout, their products orbrands seems easier to be accepted by the market. The advantage resource in the politicalstatus of private enterprise controller seems can be transformed into an enterprise’s ability toresist risks. In recent years, we found that there is a significant correlation between thepolitical identity of the corporate controller and the company’s value according to the researchto the corporate controller’s political identity of the private listed companies.For these reasons, this article selects Chinese private listed companies of science andtechnology as objects of study, hoping that by exploring the relationship between the politicalidentity of the corporate controller and the financial risk of the enterprise. Besides we tryingto give an answer how the political identity of corporate controller affects the risk of theenterprise and give a propose how private listed company of science and technology can usetheir political identity to reduce the financial risk. At the same time we also provide a newreference dimensions, for the regulatory supervision of the private listed companies of scienceand technology.This article first defines the basic concept of the paper, sort out and analyze the politicalrelations and political status of the enterprises in and out of China. Analyze the politicalidentity research in and out of China.Base with the resource dependence theory, agency theory, stewardship theory, institutiontheory, this paper analyze the affection of the political identity to the financial risk from theaspect of the constitution, the political identity of the corporate controller, and the institutionalenvironment, then I put forward five research hypothesis. Third, I collect and research thedata of finance data and the political identity of the corporate controller of234private listed companies of science and technology in the fields of manufacturing industry and informationtechnology industry during2007to2010in China, we inspect and analyze the data with themodel of panel data, we get the conclusion below:1.The political identity of the corporatecontroller is in positive correlation with corporate financial risk in private listed companies ofscience and technology;2.The political identity of the corporate controller, board officer andmanager have the same impact on corporate financial risk;3. The political identity of thecentral committee have greater influence than the political identity of local place to thecorporate financial risk in the private companies of science and technology;4.The politicalidentity with governmental functions have greater influence than the political identity withdeputy to the corporate financial risk in the private companies of science and technology;5.The political identity of the corporate controller have more notable affect to the corporatefinancial risk under low institution environment.Finally, according to the result of the empirical study, this paper offer a proposal thatprivate companies should fully and effectively use the political identity, and besides suggestthe government should enhance the construction of the institution.