The Research On The Governance Effect Of Over-investment Under The Political Connections Of Private Enterprises

In the process economy and society transformation in China, Institutional changeis a gradual reform, the characteristics of market transformation are that the oldsystem is a gradual withdrawal and the new system is slowly established. Thecharacteristics of market transformation led to a serious lack of institution and systemis imperfect, market mechanism has not been fully established, this resulted in thescarcity of stability and uncertainty, mechanism to separate business and governmentis not yet fully established, strong government and weak market become a prominentfeature of the market economy. In such an institutional background and marketenvironment, private enterprises are short of the aegis from institution and system, avariety of scarce resources of survival and development are subject to localgovernment, in order to achieve their own economic interests, large-scale privateenterprise with strong bargaining power will take the initiative to meet the politicalinvestment needs of local governments and their officials, actively expand investmentscale and overinvestment. The overinvestment behavior is the two-wayinterdependence of rent-seeking behavior based on the resources depended on eachother. Essence of this behavior is the economic interest of the exchange withoverinvestment; in this process, whether internal and external governance factors caninhibit overinvestment behavior based on bilateral exchange of economic interest, thisissue has yet to be explored in depth. This possesses important theory value andpractical significance for the further transformation of government functions andimproving the investment efficiency of private enterprises.This paper combs the related research literatures on domestic and foreign politicalconnections and overinvestment; secondary, analyzes the mechanism on politicalconnections causing overinvestment from private enterprises and local government,uses the mathematical analysis method to construct the mathematical model, thetheoretical framework simultaneously binges in private enterprises,local governmentintervention, political connections, dissect how the three together affect over-investment, and empirically analyzes political connections and the effectover-investment; thirdly using mathematical analysis method and analysis method ofgame theory explore the mechanism that the mechanism of internal and external keygovernance inhibit overinvestment, empirically analyses the governance effect ofover-investment caused political connections from the corporate governance, productmarket competition and liabilities with panel data, empirical results show that thegovernance effects of over-investment caused political connections were notsignificant from corporate governance, product market competition and liabilities onthe whole; Finally, based on theoretical analysis and empirical test results,respectively put forward some policy suggestions from two aspects of privateenterprises and local government.This study not only extends the theory of over-investment and politicalconnections, but also enriches and deepens the theoretical study of over-investmentgovernance. The innovation of this research mainly includes:First, research perspective is the innovation. Based on the perspective of resourceexchange and rent seeking, explores the mechanism of the overinvestment causedpolitical connections from private enterprises and local government at the same time,dissects local government intervention and political connections to over-investment.Second, this paper deepens and expands bidirectional effects of politicalconnections and over-investment, This paper not only how political connectionsinfluences over-investment but also how over-investment affects political connections,reveals the relationship between the political connections and over-investment is atwo-way interaction, not a one-way affect the relationship.Third, this paper enriches and deepens the two-way impact study of liabilities andover-investment. This paper not only investigates the governance effect onover-investment in debt management, but also expands and explores theover-investment to influence the future liabilities, explores the relationship betweendebt and over-investment is bidirectional effects.