A Study Of The Impact Of Managers’ Political Connection On The Firm Performance

In the increasingly competitive market, there is a strong motivation for companies to establish good relationship with the government, to obtain more support of scarce resources. Political connection can be commonly found in business circles around the world, and scholars both at home and abroad also have widespread concern with the behavior that companies are interested in the establishment of political connection. China is in the process of economic restructuring, when the government is playing a crucial role in the allocation of resources. At this time, manager’s political connection can help the enterprises get more government support, and significantly improve firm’s performance. In view of this, we studied the impact mechanism and the pathway of manager’s political connection on the firm’s performance. This article explores the impact of political connection on corporate performance under different institutional setup.This paper is divided into six parts:The first chapter is an introduction, which mainly introduces the research background, significance, research content and methods, describes the research ideas, and draws a technology roadmap of this article. The second chapter is the theoretical basis and the literature review, which describes the relevant concepts definition and classical theory, and reviews the research about the impact of political connection on the firm’s performance. The third chapter examines the impact of manager’s political connection on the firm’s performance, and discusses the substitution effect of political connection and institutional environment on the firm’s performance. Chapter IV build a test model based on the pathway of manager’s political connection on the firm’s performance to explore the path. Chapter V constructs a cross-impact model of the manager’s political connection and institutional setup on the corporate performance, and empirically tests the differences of the impact of manager’s political connection, under various institutional setup backgrounds, on the corporate performance. The sixth chapter is the research conclusion and prospect.The main conclusions of this study are as follows. First, managers’political connection has a positive role on the growth of the firm performance. Compared to provincial, city or county levels, central-level political connections significantly boost firm’s performance more. Managers’political connections can effectively improve firms’performance in regions with weak institutional environment more. Secondly, this paper examined how managers’political connection affected enterprise performance from the perspective of the management decision-making, internal control, social responsibility and government support and found financing decision, R&D investment, charity and social responsibility are effective ways. Finally, institutional setup will have an important impact in the relationship between manager’s political connection and corporate performance. In regions with poor environmental setup, manager’s political connection will play a major role in increasing corporate performance.This paper has the following three innovation points:(1)This paper constructs an impact-mechanism model of the manager’s political connection influence on the corporate performance, and reveals the differences in the influence of manager’s connection from different levels on the corporate performance.Based on the special system background in China, this paper showed that managers’ political connection can effectively promote the enterprise performance and discovered the empirical evidence that our government played a role of "the helping hand" in the economy. At the same time, based on the performance study from the perspective of different levels of political connection, this paper expanded the research categories of managers’political connection and enterprise performance.(2)Establish the testing model which is used for testing managers’political connection affects the acting path of firm performance, and empirically finds that financing decision, R&D investment, charitable donations and social responsibility are the effective path through that managers’political connection affects the firm performance.The article has established the testing model which is used for testing managers’political connection affects the acting path of firm performance, and revealed financing decision, R&D investment, charitable donations and social responsibility are the effective path through that managers’political connection affects the firm performance, thereby filling the gap that there is little research about the path managers’political connection affects of firm performance at home and abroad. Also, the article has been extended to the effect mechanism that managers’ political connection has upon firms under different institutional environment, which will make domestic study about political connection firms more completed. One side, the article can provide the solid theoretical foundation for scholars’subsequent study about the economic consequences that managers’political connection generates, and on the other side, it can also provide the useful references for the enterprise authorities’using political connection to improve the firm performance rationally.(3) Constructs the cross-impact model of the influence of manager’s political connection and institutional setup on corporate performance, and through empirical tests, reveals differences in the impact of manager’s political connection on corporate performance under different institutional setup.This paper constructs a Constructs an impact-mechanism model of the manager’s political connection influence on the corporate performance. The paper, respectively, using OLS method found that in regions with weak institutional setup, manager’s political connection plays a stronger role in promoting corporate performance. That is, in regions with weak institutional setup, political connection can play a protective role. This supplements "Law and Finance" literature, and points out that political connection can be used as an alternative effective mean of promoting corporate performance in regions with weak institutional setup in the country. This has both theoretical value and practical significance.