Political Connections、 Auditor Choice And Enterprise Value Of Private Enterprises

A company’s political behaviors have a very important influence on thecompany’s competitive advantage、 existence and development. Compared tostate-owned enterprises, political connections play a particularly important role on theprivate enterprises’ survival of the operation and development. As the gradual reformof the socialist market economy, China’s systems are not perfect，in this case，privateenterprises still have developed rapidly，research on the political connections ofprivate enterprises can help explain this phenomenon from an internationalperspective. Therefore，the research of the private enterprises’ political connectionsimpact on the enterprise value in China has an great significance.For the research of political connections and enterprise value，domestic andforeign research find that the political connections not only can improve the enterprisevalue but also can damage the enterprise value. However，the research from theauditor choice is relatively small. China’s market-oriented reforms have achievedremarkable results，but because of geographical，historical and other reasons，theprocess of regional markets is not consistent. The less the market progress is，thelarger the economic and judicial intervention will be extent，thus the intervention oflocal businesses are more and the impact that the political connections on theenterprises will be greater. When the auditor choice has also been influenced bygovernment intervention，the external audit‘s corporate governance function willnaturally be affected. Will the political connections affect the auditor choice and thusaffect the external audit’s function in corporate governance？How to achieve itsimpact？ Will the environment outside the company affect the external audit’scorporate governance function and thus affect the enterprise value？This paper has taken the theory with practice，combined normative research andempirical research. First，sort out the situation of academic research on politicalconnections、enterprise value and auditor choice；Then analyze the theory and proposethe hypothesizes；Finally，take private listed companies of the Shenzhen and ShanghaiStock Exchange from2006to2010in China as samples，build the appropriateregression model，do empirical analysis using statistical software SPSS17.0，includingdescriptive statistics，correlation test，Logistic regression analysis and multiple linearregression analysis.The results show that (1)The political connections of private listed companiesimpact the enterprise value affected by the rule of law，the higher the level of the ruleof law，the political connections have more significant impact on enterprise value. （2）The political connections of the private listed companies influence the auditorchoice. The private listed companies with political connections tend to chooselow-quality auditor，and the private listed companies without political connectionstend to choose high-quality auditor.（3）Private listed companies’ external audit canplay a role in corporate governance，choose high-quality auditors help enhanceenterprise value. And select the auditor for the intermediate link，the value of politicalconnections impact the company will be significantly improved. That is to say，political connections influence on the enterprise value need the company’s auditorchoice as the transmission mechanism and ways，the external audit quality can enlargeor reduce the influence that political connections on the enterprise value.