Economic Consequences Of Private Listed Companies In Different Types Of Political Association

Against the backdrop of the unique political system in China, the Partycommittees and the government grasp the power and dominate the market1. However,the National People’s Congress (NPC) and the Chinese People’s Political ConsultativeConference (CPPCC) are mainly responsible for legislation and judicial system aswell as participation in the administration and discussion of state affairs withrelatively weak influence in the market. In this sense, the economic consequenceswith political connections of different types may differentiate from one another.In recent years, however, due to researches about political connections didn’tdivide them from their different working-mechanisms, the results of those researchesare conflicting with each other even between similar researches. For example,Wenfeng Wu and Chongfeng Wu(2008), Danglun Luo and Qiongyu Huang(2008)found that political connection would improve the operating performance of relativelyprivate listed companies and enlarge their corporate value. But Jiangping Deng andYong Zeng(2009) found that there is a negative correlation between the politicalconnection and the operating performance.Apart from that confusion, according to the Hurun China Rich List, there was9NPC numbers and16CPPCC numbers in this list in2005which accounting for6.5%of the total number of the list. However, after6years increasing, this percentageexpands to15%in2011which has152numbers of NPC or CPPCC. What’s more,according to Securities Daily, there were7private entrepreneurs attended the16thNational People’s Congress as NPC numbers. This figure increased to17in the17thNational People’s Congress and34in the18th National People’s Congressrespectively. This growth rate is greater than all previous NPC representativesincreasing speed. In addition to the two sessions, there are a large number of privateentrepreneurs elected to be numbers of the provincial, city and county NPC or CPPCC. This phenomenon of more and more private entrepreneurs keen on participation inpolitic attracted the media, the regulatory authorities and the public’s attention. Whatkinds of impacts on the commodity market, capital market and government regulationdoes the phenomenon drawn on? Will this phenomenon lead to the further lack ofsocial equity and justice? To answer those questions is the purpose of my research.The main objectives of this study are: a) The political connection subdivided intocommittees, governments of political connection, and the NPC, CPPCC of politicalconnection, then analysis their respective economic consequences throughmathematical regression. b) Through comparative analysis of the above economicconsequences of the two types of political connections, put forward the feasible policysuggestions that can promote market fair and smooth running. c) Through theregression results mentioned above, combined with domestic facts to analysis the prosand cons impacts of the economic consequences of the NPC of political connection,the CPPCC of political connection to the market, put forward suggestions to improvethe election mechanism of the NPC representatives and CPPCC members. d) Throughthe regression results mentioned above, combined with domestic facts to analysis thepros and cons impacts of the economic consequences of the party committee ofpolitical connection, the government of political connection to the market, suggestsmeasures to improve the system of official retirement departure in order to preventpolitical corruption.The results show that political connections of different types may result indifferent regression coefficients of economic consequences, which also displayremarkably adverse plus-minus. In terms of financing, the political connections withNPC and CPPCC could narrow the external financing gaps by taking advantages ofthe abundant bank loans, off-balance-sheet financing and business credit. Withnegative correlation with the aforesaid financing approaches, the political connectionswith Party committees and governments, however, widen the external financing gaps.Speaking of the company profiting, the political connections with NPC and CPPCChave enhanced the profitability of privately-owned enterprises; on the contrary,political connections with Party committees and governments reduce their profitability; with regard to supervision and policies, auditors and China SecuritiesRegulatory Commission (CCRC) hold a relatively inclusive attitudes towards politicalconnections with Party committees and governments but a strict attitudes towardspolitical connections with NPC and CPPCC. Meanwhile, preferential taxation policiesare also granted to political connections with Party committees and governments.