A Study On The Degree Of Political Connection, Institutional Environment And The Performance Of China's Private Enterprises

Political Connection generally exists in private enterprises, and it is well known that political connection is a hot topic in academe. Numerous academic researches related to political connections show that it is significant for private enterprises. However, current researches are deficient, not only because there is not a theory framework about the degree of political connection,institutional environment and the performance of China's private enterprises, but also the associated empirical studies did not reveal the characters of China's different regions. On the basis of this background, this paper uses the theory of new institutional economics to analyze the influence between political connection and institutional environment on corporate performance. And at the same time, to display the characters of different regions, the empirical study not only makes overall analysis on samples, but also makes local analysis by dividing the samples into three parts that eastern region, central region and western region. Therefore, the study of this paper has strong theory and realism significations.Firstly, This paper discusses political connection in the framework of new institutional economics, and analyzes the relationship between political connection and institutional environment private enterprises face, on the basis of which investigates the influence of the interact between political connection and institutional environment on corporate performance. Secondly, This paper proposes hypotheses on the relationship between political connection and institutional environment private enterprises face and the influence political connection on corporate performance, at the same time builds corresponding econometric model through theoretical analysis. Thirdly, This paper measures institutional environment by market indices and makes empirical test on the proposed hypotheses by selecting listed private enterprises from 2003 to 2008 as samples, the empirical study not only makes overall analysis on samples, but also makes local analysis by dividing the samples into three parts that eastern region, central region and western region. Finally, according to the empirical conclusions, this article proposes policy recommendations on promoting the development of private economy healthily.There are main conclusions of this paper as follows: (1) Political connection is a inform institution, which affects the performance of private enterprise by the interaction between political connection and institutional environment. (2)The empirical conclusions of this paper about relationship between political connection and institutional environment show that the results can not provide reasonable evidence from the perspective of overall. However, political connection is substitute of institutional environment in the eastern region, while is supplement in the central region and western region. (3)This paper divides private enterprises into strong and weak political connection groups in the empirical study about the influence of political connection on private enterprises performance. And all the results of weak groups are not remarkable, only the results of strong groups are remarkable. We can see the higher the degree of political connection, the higher the economic performance of enterprises from the perspective of overall. And in the eastern region, if the degree of political connection is higher, the economic performance of enterprises is lower in the strong political connection group. While in the central region and western region, if the degree of political connection is higher, the economic performance of enterprises is higher.