Analysis Of Political Connection And The Investment Behavior Of Private Listed Companies

The econe development of the onterprise is not only tc(?)e:the co(?)tive market envir(?)but(?)to de(?) with the(?)ntricacie(?)ke environment. Pomcal connection generally refers to the imphen or explicit link between the company and the government. This contact may have some impact on the company’s performance, financing, taxation and other aspects. In Economic Transition Period, because the government plays a leading role in the socio-economic, and act as the role of the distribution of social resources, many enterprises in order to get more resources and support from the government through a variety of ways with the government or government officials to establish political connection. Dealing with government the relationship also constitutes an important aspect of corporate strategic decision-making and conduct of operations. This shows the study of the company’s investment behavior affected of political connection has important theoretical and practical significance.On the basis of literature review of related research, first, it provides a theoretical support and discusses the mechanism of the formation of political connection by introducing the theory of social capital, government "support hand" and "grabbing hand", Entrepreneurs in politics theory as well as rent-seeking theory. Second, it analysis of the impact of the political connection to the investment behavior of private enterprises from the three-pronged included political connection can obtain financing to facilitate and expand investment in space as well as the government bailout in financial trouble, and it discusses mechanism of action that the political connection affect the investment behavior of listed companies. Third, it makes use of combinations both of normative and empirical research methods, based on the empirical data from2008to2011of Chinese Shanghai and Shenzhen all private listed companies, and comprehensive uses of the dummy variable and assignment method to measure of political connection, establish Logit regression model. It interprets the impact that the political connection to the investment behavior of private listed companies through empirical testing from two points of view that are the company’s types of investments and investment efficiency. Finally, on the basis of theoretical and empirical research, it puts forward policy recommendations to improve the excessive investment behavior of private listed companies.This paper makes the following main conclusions and opinions:From the perspective of different kind of investment, political connection has no significant effect on the overinvestment in fixed assets. Political connection leads to overinvestment behavior in intangible assets and long-term equity significantly, and the greater the strength of political connection, the greater the probability of overinvestment in intangible assets and long-term equity. Relative to the central political connection, local political connection leads to overinvestment behavior in intangible assets and long-term equity significantly. From the perspective of entire investment, the political connection leads to company’s overinvestment behavior significantly, and the greater the strength of political connection, the greater the probability of overinvestment.