An Empirical Study On The Performance Of Listed Firms Affected By CEOs' Political Connection

Nearly 24% of the A Share listed firms in a sample of 1496 in China have politically connected CEOs during the year 2005 to 2007. And this paper is to test whether firms with politically connected CEOs are easier to obtain more governmental subsidies, easier to get bank loans or these firms mostly exist in governmentally regulated industries. Then, how about the performance of them? Here, an empirical study is made, with CEOs' political connection as proxy variable of the Political Connection. In the following paper, the performances of these firms with political advantages are tested with model of ROA which is said to be a regular index for performance. In order to further elaborate the reliability of this test, both Tobin Q and F are taken as the proxy variables of performance into the Correlating Regression. Here F is calculated by the Factor Analysis and used as a comprehensive index of performance of listed firms.The author found firms with politically connected CEOs had obvious political advantages, for example, they are easier to get much more bank loan, easier to get more governmental subsidies and more likely to exist in regulated industries. Perhaps thanks to these political advantages, performances of firms with politically connected CEOs shows better.Finally, the author did two group analyses and found CEOs with NPC - connection can bring higher bank loan rate to their companies than which CEOs with other political connections can bring to. However we could not find the significant relations between firms with these two different types of political connections, and between performances of firms with Ex- or Current NPC-connectional CEOs.