Research On The Influence Of Political Connections On Company Value

In the historical period of economic system transformation,it is common for private enterprises to establish political connection with government.In order to study the influence of political connection on the value of private enterprises in manufacturing industry,this paper takes the background as the starting point,reviews the research results on political connection,company value and the relationship between them,and provides the perspective and ideas for the next research in the paper.In order to reveal the connotation of essence,mechanism,law and deep reasons of the impact on company value,it expounds the basic principles of the representative theories of social capital theory,rent-seeking theory,institutional and institutional change theory and information asymmetry theory related to the topic,and conducts a comprehensive and systematic theoretical analysis of the political connections of private enterprises in the manufacturing industry.On the basis of the theoretical analysis,this paper puts forward three research assumptions on the overall impact of political connection on company value and the different influence on company value of the strength and the political background of political connection.It provides concrete content and clear objectives for the empirical study.Study the relationship between political connection and company value from multiple perspectives and in all directions is a highlight of this article.In line with China’s strategy of vigorously developing the real economy led by manufacturing,the empirical part of the paper takes the private manufacturing companies listed in Shanghai and Shenzhen from 2014 to 2017 as the research object,and eventually determines 2,926 sample observations.The research design uses political connection as the explaining variable,the company value as the interpreted variable,and at the same time incorporates relevant control variables to establish three analysis models to test the research assumptions.The measurement of political connections focus on the company’s chairman and general manager,and use the virtual variable method and the assignment method to perform multidimensional measurement.When measuring the strength of political connections,for the sake of accuracy,the paper divides the research objects into government officials and representative committee members and assigns them according to their highest levels and then add the scores as the strength of the political connection of companies.It is a novel part of this paper.The measure of company value uses the Tobin’sQ which ismatured and commonly used in theory and operation as an alternative indicator.Empirical analysis is to verify the research hypothesis through descriptive statistical analysis,correlation analysis and multiple regression analysis,and then perform the robustness test to examine whether the empirical results are reliable.The conclusions of this study are:(1)Under the specific cultural background and imperfect economic system in China,the political connection established between the private listed companies in the manufacturing industry and the government can help enterprises to obtain more economic resources and policy benefits.Although companies have to pay a certain cost to establish political connection,the advantages are still greater than the disadvantages.The political connection of private manufacturing companies can increase the company value.(2)The higher of the political intensity of private manufacturing enterprises,the better to maintain regular communication and contact with the government,and increase profit opportunities,access to additional benefits and subsidies to effectively protect property rights and prevent illegal infringement.Therefore,the higher of the political intensity of private manufacturing enterprises,the higher of the company value.(3)Although the central administration is gradually decentralized,the central government is still the framer of macroeconomic policies and the determinant of the direction of the macroeconomy of enterprises.The vertical system of political management at the local level has not changed and the central government can influence local government in many ways.Compared with local political connection,central political connection can obtain more resources and support more easily and is more conducive to increase company value.Based on the conclusions of the study,this article has gained: Manufacturing private enterprises should attach great importance to the construction of political connections and provide a good external environment for the survival and development of enterprises.The political relationship between the enterprises and the government should be based on the premise of legal discipline,make it has a conformable,just and harmonious influence.All sectors of society and governments should work together,promote the fair and healthy development of private enterprises.