Impacts Of Private Enterprise’s Political Connections On Its Performance

Chinese private enterprises have become an important force in promoting the development of the nationaleconomy. However, due to historical reasons, the private enterprise was being discriminated against in thepolitical system environment and financial environment. Therefore, private entrepreneurs keen to establishpolitical connections in order to get the supports and protections that can not get from the legal and formal system,such as easier access to government regulation of industry, can gain more bank loans and longer the duration ofthe loan and other benefits. Political connections exist throughout the world, many researches have found thatpolitical connections as a feature property of the enterprise would have an important impact on the enterprise’svalue, like the structure of enterprise’s ownership, capital structure and business diversification. But there is noconsistent conclusion on political connections can promote the enterprise’s value or damage enterprise’s value.Therefore, this paper select525(2010) private listed enterprises as samples, put forward the hypothesis of politicalconnections and the performance of the private enterprise with resource dependence theory, rent-seeking theoryand the theory of government intervention as guide. Then, use multiple linear regression equation to study theinfluence of political connections made on enterprise’s performance, the differences after distinguishing the typeof political connections, and futher analyses the influence of the different areas’ market-orient process made onthe relationships between political connections and enterprise’s performance based on the special institutionalbackground in China. In addition, this paper apply moderating effect test to explore the paths that politicalconnections impact on enterprise’s performance.The empirical results found that, political connections can improve the performance of private enterprises whendo not distinguishing the type of political connections; after distinguishing the type of political connections, one isgovernment officials, the other is representatives, and found that the former can significantly improve enterprise’sperformance, while the influence of later is not obvious; in consideration of the factor of market-orient process,government officials’ political connections play a positive role in promoting the enterprise’s performance. Also,the higher the degree of government intervention, the improvement of government officials’ political connectionsmade on the enterprise performance is more obvious. In addition, the moderating effect of the financingconvenience and preferential tax is remarkable and the moderating effect of financial assistance is not significant.