Political Connections, Officials Independent Directors And Firm Value

In this paper, the Central Organization Department issued [2013] No.18 paper caused "the official independent director resignation tide" as the entry point for the study of political ties Relations Officer Independent Directors and Corporate Value.In this paper, empirical research found:(1)For state-owned enterprises, in the control of the officials of independent directors individual characteristics, after the corporate governance characteristics, independence of the board and corporate fundamentals characteristics, officials of independent directors to resign term stock enterprises cumulative abnormal return (CAR) has brought positive impact, explained officials of state-owned enterprises had to hire government background as an independent director of the enterprise is not a "wise" choice, which the resignation of the market think that state-owned enterprises is a good news, confirming the corporate political affiliation rating value and officials of independent directors a significant negative correlation, that is, under other conditions in certain cases, from state-owned enterprises resigned official independent director political affiliation level (score) the higher the short term but on the company’s stock price prices have a facilitating role. And state-owned enterprise officials of independent directors to resign behavior stock market continues to deliver positive signals in the medium and long term, about half in the next calendar year (120 days), the average cumulative abnormal return business is significantly positive, meaning the resignation of the transfer of an enterprise stock market yields will continue to rise signal.(2)For private enterprises, both in the short-term or long-term time window, officials of independent directors to resign behavior cumulative abnormal stock returns of enterprises had a negative impact, resulting in a decline in its stock price of companies to prove officials of independent directors to private enterprise to bring a certain value, the resignation of the enterprise are either short-term or long-term damage caused by the stock price. However, after controlling for individual characteristics officials of independent directors, corporate governance characteristics, independence of the board and corporate fundamentals characteristics after the loss becomes insignificant; however, private enterprises from short-term performance, the officials have the political resources of independent directors resignation is a good thing, but increased the private enterprises operating performance. That explains to establish political ties through a means such as hiring officials of independent directors but will cause damage to the company’s operating results, but as the level of local government intervention weakened business location and business improvement in the level of legal protection, the higher political level negative impact to business performance independent director officials brought in relief. So, on the one hand political affiliation of independent directors to the short-term and long-term stock market value of private enterprises had a positive value, but on the other hand, after considering location and weaken the level of legal protection of the local level of government intervention in business, independent directors the higher the level of political contact for private enterprises short-term operating performance worse, that is, to short-term business performance of private enterprises has brought a negative impact.Based on empirical findings, we propose policy recommendations:one independent director system of corporate governance in our country can play a better role in practice; on the other hand in order to build a new, healthy, "pro" plus "Purity" of government-business relations, China’s economy is aimed at creating a new normal Delicate gas is a good environment.