A Study On The Relationship Between Politicalconnections And Private Enterprise Value

In China, the core competitive ability is the most importance point for private enterprises’ survival and developing, including enterprise’s key resources and independent innovation ability. Private enterprises have become the main power arty for innovation since the fifth plenary session of the 16 th took innovation as the important strategic task in our country. However, the defects of our existing system are main obstacles in private enterprises ‘process of resource acquisition and innovation. Private enterprises actively seek an alternative mechanism – political connection to ensure the needs of their development because of this lack. According to statistics, about 51.1% business owners are the people’s congress members and political consultation committee members, about 28.3% are party in the study. In recent five years, about 60% private enterprises have the background of the NPC and CPPCC; About 50% private enterprises have the background of the president, vice president of industry association. Private entrepreneurs generally requires 50% to 60% of energy and time to deal with affairs related to government. Thus, it is a common phenomenon of political connection of private enterprises. The research of the relationship between political connection and enterprise is particularly important in such a background. This paper not only reveals the endogenous relation between political connection and enterprise value, but also studies the relationship between political connection and innovation ability and the conduction effect them. It is of great significance to understand political connection of private enterprises. Provides a decision-making basis for the enterprise if need set up political connection, establish which kind of the political connection and how to establish political connection.Firstly, this paper extracts political connection based on the resource dependence theory, system theory, social capital theory, government intervention theory, rent-seeking theory, upper echelons theory and transaction cost theory, then put forward the research hypothesis. This paper chooses the private enterprises from 2009 to 2013 small and medium-sized board listed as research sample. Use the grading method measuring enterprise political connection and to distinguish the direct and indirect political relationship. Use multiple linear regression and instrumental variable method to study the endogenous relation between political connection and enterprise value. Use the methods of multivariate linear regression and the mediation effect test to study the relationship between political connection and the enterprise innovation ability, the relationship between political connection, innovation ability and enterprise value.The stuty results show that the private enterprises’ political connection and enterprise value has a active effect. The government will to affect the private enterprises with good performance and high value. After eliminate endogenous impact, they are significantly quadratic nonlinear relationship. There is significantly inverted u-shaped relationship between direct political connection and enterprise value, and so does the indirect political connection and enterprise value. In addition, the study also finds that political connection will impact on enterprise innovation ability. There is significantly inverted u-shaped relationship between direct political connection and innovation ability, and significant u-shaped relationship between indirect political connection and innovation ability. Innovation can promote enterprise value, and exist conduction effect between political connection, innovation and enterprise value. This study has three innovations based on existing research: firstly, considering the endogenous relation between political connection and enterprise value; Secondly, study the influence of political connection to enterprise innovation ability; Finally, study the conduction effect between political connection, innovation and enterprise value. Enrich the related research literature in the field.