An Empirical Study On Institutional Background, Enterpriser Political Characteristics And Political Connection Of Chinese Private Enterprises

Political connection is a universal issue. Although there are some researches on the economic consequences of political connection, there is still little literature found on the more fundamental issue, namely the root of political connection, not to mention research on analyzing private enterprises' political connection incentive in Chinese economic transition. This paper explores factors that affect private enterprises' political connection establishment from the aspects of institutional background and enterpriser's political characteristics.Followings are the main research findings of the empirical study on a sample of 272 Chinese private enterprises that went public between 2002 and 2006.1. 76% private enterprises established political connection and 34% enterprisers are of political connection type.2. Institutional background greatly affects the degree of political connection. Private enterprises in those areas in an earlier stage of market transition where there is more official intervention, less developed non-state economy, less competitive financial trades and weaker legal protection would have a higher degree of political connection. And among the institutional factors mentioned above, legal protection is the most influential factor. Meanwhile the institutional background has close connection with political characteristics of private enterprisers.3. Private enterprises controlled by enterprisers of political connection type which take form of a high proportion of top managers who are either representatives of People's congress of all levels or CPPCC members or officials would have a higher degree of political connection.In short, this paper tries to explain Chinese private enterprises' political connection incentives from the aspects of institutional background and enterpriser's political characteristics. The research findings present an overview of the growing and the behavior characteristics of Chinese private enterprise, and help partly interpret "the Puzzle of China". And it has its academic significance to "law and finance" as well.