The Effects Of Private Business Political Connection On Its Corporate Governance Structure

Since China adopted the reform and opening-up policy, millions of private businesseshave emerged with rapid growth in terms of quantity, scale and competitiveness. However,they grows up with the background of imperfection of market and over intervention ofgovernment. So there comes some phenomena, such as building political connections.Besides, the governance structure of private enterprises also showed some phenomena,such as the lack of professional manager,the single-large shareholder and the chairmanwho is also the CEO.This paper examine whether political connections effect privateenterprises’ corporate governance structure. The results show that listed private companywith politically connected ultimate controller tend to not hire professional managers; theultimate controller with political connection tend to concentrate their control right; thechairman with political connection tend to occupy general manager himself. This paperalso find that compared with the high degree of marketization area, in the low degree ofmarketization area, the chairman with political connections shows more intention tooccupy general manager himself. And the results explains one of the reasons why theprivate companies structure show the phenomena, such as the lack of professionalmanager,the single-large shareholder and the chairman occupy general manager.It is therelationship between government and businesses.