| At the beginning of the founding of the People’s Republic of China,the legitimacy of private ownership was deprived,and a single state-owned planned economy supported the initial development of China’s economy and society.Therefore,at that stage,the Party organization only existed in state-owned enterprises.However,with the convening of the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China,non-state-owned economic entities such as private enterprises not only obtained a legal status but also grew and developed with the support of the Party’s policies towards private enterprises,becoming an important engine for the rapid development of China’s economy in the following 40 years.Party organizations have gradually been established within private enterprises,and have also received policy and legal support.[ Article 19 of the Company Law of the People’s Republic of China stipulates that "in a company,in accordance with the provisions of the Constitution of the Communist Party of China,an organization of the Communist Party of China shall be established to carry out Party activities.The company shall provide necessary conditions for the activities of the Party organization." ] According to the Analysis Report on the Current Situation of Party Organization Construction in Private Enterprises issued by the All-China Federation of Industry and Commerce in 2019,the coverage rate of Party organizations in private enterprises in China has reached 48.31%.The existence of Party organizations in private enterprises has become an important component of the coupling relationship between the political leadership of the Communist Party of China and the autonomous operation of private enterprises.At the same time,compared with state-owned enterprises with full coverage of Party organizations,there is obvious discretion in the establishment of Party organizations in private enterprises.Therefore,the establishment of Party organizations in private enterprises is not only influenced by external factors such as institutional and policy factors,but also by the recognition and embrace of private entrepreneurs towards the leadership of the Communist Party of China.It is a result of the political-business linkage and common development under China’s special national conditions.Therefore,studying the impact of the establishment of grassroots Party organizations on the development of private enterprises has become an unavoidable topic in our research on the development logic of China’s private economy.This article is based on data collected manually from the establishment of party organizations in privately-owned companies that were listed from 2005 to2019.The aim of this study is to explore the changes in cash holdings of privately-owned enterprises after the establishment of party organizations,and to verify the role of the Communist Party of China(CPC)in leading privately-owned enterprises to obtain economic benefits through supporting and embracing party building,as well as to verify whether local governments have played a "helping hand" in establishing party organizations in privately-owned enterprises under the current institutional environment in China.This study provides experience and reference for the party building decisions of private entrepreneurs,as well as for the CPC to further play a core role in the construction of socialism with Chinese characteristics and guide the better and faster development of the Chinese economy.The results of this study reveal that:(1)Compared with other companies,privately-owned enterprises that establish party organizations have lower cash holdings.This is not due to the defensive mechanism against exploitation,but rather due to the alleviation of financing constraints.This also rules out the "grabbing hand" of local governments and supports the "helping hand".Specifically,after the establishment of party organizations,privately-owned enterprises obtained more long-term loans and a higher proportion of credit loans,which helped to alleviate financing constraints.This ultimately led to a reduction in the internal cash holdings due to the weakening of the "precautionary motive" for cash holdings;(2)Based on the financing relief mechanism of the political-business relationship,this study ruled out the impact of "pressure conformity" behavior such as rent-seeking and negative social responsibility on the path of reducing cash holdings,and proved that the main mechanism of financing relief obtained by the establishment of party organizations is that the positive "political signal" conveyed by the party organization won the ideological favor of the government and banks that are also under the leadership of the party.At the same time,the party organization established a good external image and social reputation for the company’s restraint on misconduct,thus gaining the support of the government’s "helping hand" and social capital.From the perspective of cash holding motives,this study also excludes the role of agency problems in improving cash holdings.Furthermore,by examining the value of cash holdings,it is found that the establishment of party organizations improves the cash holding value of enterprises,further confirming the positive impact of party organizations on cash holdings.(3)Through the heterogeneity test of the influence of red culture at the regional level,this study finds that in regions with stronger red culture and spiritual penetration,the establishment of party organizations in private enterprises has a greater impact on cash holding behavior.This indicates that the political signal conveyed by the establishment of party organizations diffuses differentiated values influenced by regional culture;(4)Through the heterogeneity test of the institutional level at the regional level,this study finds that in environments with lower levels of marketization and lower per capita GDP,the establishment of party organizations in enterprises has a greater impact on cash holding behavior.This indicates a strong correlation between the positive "political signal" transmitted by party organizations and the completeness of external institutions in the role of financing relief;(5)Through the heterogeneity test of industry,this study found that the establishment of party organizations does not significantly affect the cash holding behavior of enterprises in high-growth and high-tech industries,indicating that potential investment and growth opportunities will affect the cash holding decisions of enterprises;(6)Through the heterogeneity test of whether the board and senior management have political connections,it was found that there is a certain substitution effect between the establishment of party organizations and political connections on cash holdings.Finally,after the Heckman two-stage test and PSM test,the results of this study remain robust.On the basis of the main conclusions of this paper,three suggestions are made:firstly,compared to the previous type of political association that relied on individual identity,the normalised and institutionalised organisational structure of grassroots party organisations can be a direction for private enterprises to build a new type of political-business relationship;secondly,by analysing the economic benefits won by the establishment of party organisations in private enterprises,it is conducive to responding to social doubts about the construction of party organisations in private enterprises Thirdly,the government should continue to play the role of a "supporting hand" to create good conditions for enterprises to invest and finance,while vigorously promoting a fair and healthy business environment.Thirdly,the government should continue to play the role of a "supporting hand" to create favourable conditions for enterprises to invest and raise capital,while vigorously promoting a fair and healthy business environment to ensure the long-term sustainable development of enterprises with a better institutional environment. |
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