Research On The Relationship Between Executive Political Connections And Enterprise Risk-taking

At present,China is still in the period of economic transformation,market management and government management run in parallel,and part of the right to allocate resources is still owned by the government.In terms of resource acquisition,private enterprises do not have obvious advantages over state-owned enterprises because they do not have a natural government background.Still,China’s private sector is growing well and contributing a lot to the country’s economy.Some scholars believe that China’s relationship mechanism,especially the political connection as one of the informal alternative mechanisms of the market and legal system,plays a major role.Political connections exist in most businesses.It is because of the universality of the political relationship among senior executives that scholars,businessmen and politicians have been paying close attention to it,drawing different conclusions from each other.On the one hand,in the economic transformation of China,executive associated with the government to help enterprises to obtain resources advantage,make up for the inadequacy of their own capital supply,so as to exert its special value and function,on the other hand,the political association of creating and maintaining cost is required,may cause the government rent,distortion of enterprise resource allocation,and so on and so forth,is not conducive to enterprise long-term development.The level of enterprise risk bearing not only affects the long-term development of enterprises,but also plays a very important role in promoting the upward trend of social and economic indicators.From the perspective of micro level,the current risk taking level of Chinese enterprises is generally not high.Appropriately raising the risk taking level is beneficial to enterprises to obtain more benefits,thus promoting enterprises to have higher value.From the macro perspective,risks are often accompanied by benefits,and the high returns obtained by high-risk projects will help accelerate the process of capital accumulation and contribute to the long-term and sustained economic growth.The different levels of risk taking among various industries and companies reflect executives’ choices on different risky projects when making investment decisions.Nowadays,scholars pay more attention to the mechanism of senior executives’ age,male and female,education degree and other characteristics on enterprise risk taking level,and few literatures directly examine the mechanism of senior executives’ political correlation on enterprise risk taking level.Based on the principal-agent theory,high-order theory and rent-seeking theory,this paper analyzes the moderating effect of agency cost and official turnover on the relationship between senior executives’ political connections and private enterprises’risk taking.The following conclusions are drawn:(1)the political connection of senior executives can inhibit the risk-taking level of private enterprises.(2)in enterprises with different agency costs,there is a significant difference in the impact of senior executives’ political association on private enterprises’ risk-taking level.In other words,compared with low agency cost,high agency cost intensifies the inhibitory effect of senior executives’ political association on private enterprises’ risk-taking level.(3)official turnover alleviates the restraining effect of senior executives’political connections on the risk-taking level of private enterprises.Based on the research conclusion,this paper puts forward the following Suggestions:private enterprise executives should correctly recognize the "two sides" of political relations,and should not only focus on temporary benefits at the expense of the long-term interests of enterprise development;Private enterprises should attach importance to the reconstruction or improvement of the internal governance structure of the company,regulate the irrational behavior of senior executives to pursue self-efficacy through political connections,reduce agency costs,so as to alleviate the negative impact of political connections of senior managers on the level of risk taking.The government should regulate its own behavior,correct its role,establish the correct concept of serving enterprises,and promote the continuous improvement of market system to create a good operating environment for private enterprises.