Ownership Structure, Politically Connected Managers And Firm Value Of China's Listed Firms

Over the past 20 years, scholars of the world have studied political connections of many countries' companies. They are convinced that political connection can bring not only advantages, but also some negative influences. China is the largest developing country in the world, being transformed from a highly centralized planned economy to a market economy. Under the co-existence of different economic systems, political connection will have diverse effects on enterprises of various ownership structures.Using samples during 1999-2004, this research is aimed to study the link between political connection and market valuation in China's listed firms with different structures. Moreover, political connection will be segmented into different levels, in order to get a better command of its influence.This study indicates that, generally, there is no significant relation between political connection and market valuation. However, the non-state-owned listed firms with political connection do have more significant positive influences on their values when differentiating the ownership structures. Judging by the levels of political connection, the under-city level political relationships are more valuable. Moreover, this study finds that there is no direct impact of the executives' Congress background.This study is mainly focusing on the different relations between political connection and market valuation based on different ownership structures. Political connection is also segmented into different levels, thus bringing positive influences on management of corporations both theoretically and governance.