Research On Political Connections、Marketization Degree And Non-efficient Investment Of Listed Companies

The MM theory points out that The company’s investment decisions has nothing to dowith capital structure In a perfect capital market. For company decision makers, internalfund and external fund can substitute each other.But in fact,due to the asymmetricinformation and financing constraint, you can see the non-efficient investment behavior oflisted companies everywhere. Non-efficient investment can not get resources effectivelyconfigurated, and lead to waste of resources, seriously restrict the company’s long-termdevelopment, even cause a lot of losses or even bankruptcy and liquidation. To thenon-efficiency investment, previous studies mainly from the perspective of informationasymmetry between controlling shareholders and managers or the free cash flow, thegovernance of over-investment are generally from the micro level such as corporategovernance, focused on the board of directors, management incentive, ownership structure,few scholars research this from the perspective of macro factors, like the media supervision,product market competition, etc.Listed companies which establish political connection,however, tend to have more bank loans and tax incentives,and alleviate the financingconstraints,thereby affect the investment behavior of the enterprise. So combined withChina’s unique institutional background and economic environment to study politicalconnection’s effect on the non-efficient of investment of listed company has a certaintheoretical and practical significance.In this paper, on the basis of previous studies, startingfrom the basic theory of investment and financing, using the method of multiple regressionwith panel data, tests whether political connection leads to excessive investment andinhibits under-investment to some extent under the background of marketization.Firstly,this paper measures the efficiency of investmen through the regression mode,tests whether there is over-investment or under-investment behavior in Chinese listedcompany,and.Then tests whether political association affect over-investment andunder-investment the empirical research.At last,groups by the degree of marketization andownership property,tests the the differents about the relationship between the politicalconnection and the non-efficient of investment. The results are as follows: There is nodirect relationship between political connection and the non-efficient investment, Afteradding in marketization degree, however, executive politics associated significantly beingpositive relevant with over-investment, but being negative relevant withunder-investment,and political relation with government officials is more significantiy relevant than representatives class political association;The degree of Marketization canweak the impact of the political association on the excessive investment and theunderinvestment.