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Study Of Impacts That Political Connections Act On The Investment Decision Of Private Enterprises

Posted on:2011-02-04Degree:MasterType:Thesis
Country:ChinaCandidate:X J WangFull Text:PDF
GTID:2189330332960892Subject:Accounting
Abstract/Summary:PDF Full Text Request
The enterprise's economic development relies not only on facing a highly competitive market environment, but also dealing with complex non-market environment. Under China's economic background and political system in transition, with China's rapid economic development, the relationship between government and business issues becomes a new hotspot. Some scholars argue that political connections played a legal protection of investors and the role of alternative mechanisms. Others found that the relationship between private enterprises and political ties not only provides a degree of "hidden protection", but also brings some resources. From these perspectives, political affiliation will significantly change the business investment environment, and affect investment decisions.On the basis of reviewing the international and domestic research findings on how political connections impact the investment decisions of listed companies, the paper select right proxy variable of political connections, and use the total investment,Investment-cash flow sensitivity,diversified investment and barrierrate to inspect the capital investment decision. By analyzing how political connections affect non-market environment, it establishes multiple regression models and a logistic regression model, selects data collected from the private enterprises in China from 2007 to 2009 as the sample and then.does an empirical research on it. Political connections'networking which is constructed by corporations and government can bring advantageous resources and improve the external investment environment, thus influence investment decisions of the private enterprises. By describing the strength of political connections, this paper studies private enterprises'investment decision-making behavior from two perspectives:investment scale and investment structure.Research findings show that:Firstly, the stronger political connections are in favor of overcoming the enterprises'financing difficulties and reducing dependency on internally generated cash, so make it easier to enhance the scale of investment. Secondly, for avoiding the market risk coming from the specialized strategy, company with more political connections are better than those with less political connections to select complex investment, and for which the government regulation would not act as barriers to market access。...
Keywords/Search Tags:Political Connections, Investment scale, Investment-cash flow sensitivity, Investment structure
PDF Full Text Request
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