Political Connection Of Board, Dividend Policy And Enterprise Value

Director is responsible for enterprise's management and decision-making, his political connection as resources, as equity status and governance structure, plays an important role in the enterprise. As a centralized management system country who transformed into the market economy, government has enormous influence to the market in china. Therefore, the study of the relationship between political connection and enterprise value is very meaningful.Scholars found that political connection may improve enterprise performance, and may have negative influence to enterprise value either. And further exploring of the mechanism of this influence has been done, trying to find that through what the political connection affect enterprise value. Through the analysis, scholars empirically proved that political connection can improve enterprise value, including the financing convenience effect, the preferential tax effect and control breakthrough effect, etc. But the empirical study about why political connection can reduce enterprise value is rarely, representative viewpoint is that political connection manager's capacity is low and the high cost of maintaining political connection, and these ideas just stay in the conjecture, without empirically proof. Therefore, Study the relationship between political connection and enterprise value, and the mechanism of political connection reduce enterprise value of China's listed companies is very necessary.Using the samples of 2008, eliminate financial enterprises, ST enterprises and delisting enterprise. Through setting cash dividend model and enterprise value model, using the Multivariate linear regression analysis method to study the relationship between political relations on board, cash dividend and the enterprise value.The conclusion of this article is as follows: (1) Overall and direct political connection can improve cash dividend rates, indirect political connection doesn't have this effect. Only government working experience directors can ascend cash dividends in state-owned enterprises, but for the private enterprises, all direct and government adviser directors can ascend cash dividends, but industry association executive background directors have negative effects. (2) Overall, the government working experience and government adviser directors can significantly improve enterprise value. NPC and CPPCC, and industry association executive have no significant influence. Overall and indirectly political connection associated with cash dividends can significantly reduce enterprise value, direct political connection associated with cash dividends have no significant influence. In state-owned enterprises, there is not significant relationship between government working experience directors and enterprise value. In addition, all political connection associated with cash dividends have no significant influence to enterprise value, but relatively, the direct politics connection associated with cash dividends is more obviously in private enterprises, and the indirect political connection associated with cash dividends is more obviously in state-owned enterprises. (3) In the high marketization level regions, all kinds of political connection can't influence enterprise value, but overall political connection through cash dividends can significantly reduce enterprise value. In low marketization level regions, all political connection can significantly improve enterprise value, and the political connection associated with cash dividends have no significant influence to enterprise value.This article has certain exploratory, contributions are mainly embodied in the following aspects: the topic has certain novelty, studies the relationship between political connection, cash dividend and enterprise value earlierly in domestic. In the variable selection: Firstly, political connection is divided into directly and indirectly political connection. Compared with the previous studies, the variable discuss is more deeply. Secondly, in the measure of political connection, we use the political connection directors proportion, it can overcome virtual variable's defects. In addition, industry variables and degree of marketization was controled in analysis.The conclusions of this paper have following theoretical and practical significance: Firstly, when choosing managers, the shareholders should not blindly to implement political strategy to select directors who have political connection. This study found that, although political connection can improve enterprise value, but to the different types and different political connection, the effect is different. Secondly, as capital market participants, if they tend to obtain stable dividends income, besides analysis financial index, the investigation of political connection is also important. In addition, the conclusion can provide reference to the managers. Such as we find that the enterprise's financial leverage is higher, and has negative effects to enterprise value, it can provide reference to enterprise financial arrangement.