Political Connections And Government Subsidy Of Companies Suffering Financial Distress

In our country,the form of government subsidy is various,and the type is diversifying.The phenomenon that the government aids the listed company falling into the financial distress is common particularly in the capital market.The government subsidy plays such a vital role that it prevents the listed company from delisting by realizing a turn from loss to profit in the account.At present academic research on the government subsidy is relatively limited at home,and mainly concentrates on the aspect of economic effect of government subsidy,but there is less research about the reason why these companies can receive government subsidy.The study of overseas scholars indicated that the political connections of the listed company play a positive role to government subsidy.In view of the prevalence of political connections in our country,local government often aids the company falling into financial distress in order to retain the shell resource.This article considers the listed companies falling into the financial distress to be the objective of study,then constructs an index standing for the political connection of the listed company, establishes the multi-dimensional linear regression model to carry on the analysis,and examines the influence that political background of this kind of companies plays on government subsidy.This article studies the relationship between political connections and government subsidy earlierly in domestic academic field.This researching conclusion of this article is as follows:in our country whether the listed companies and the listed companies falling into financial distress obtain government subsidy has not been affected by political connection in the whole.Even if considering the local government's intervention and the local government's financial situation,the conclusion still holds.But after considering the local government's financial situation,and further differentiating the nature of listed companies under this situation,we discover that,in the areas having financial surplus, the political connections of private listed companies falling into financial distress has a positive relationship with the government subsidy they obtained,that is,the higher political connections is,the more government subsidy the company obtains.This article is explorating to some extent and studies the relationship between political connections and government subsidy earlierly in domestic academic field.It selects the listed companies falling into the financial distress as the object of the study. Moreover the selection of the studying variables has two big breakthroughs: calculating political connection index by citing the formula of political influencing index and using the method of giving grades,and then analysing after controlling the local financial situation and considering the imbalance of economic development of different areas in our country.