The Research On Political Promotion Of Executives Influence On The Enterprise Value

Enterprises, which are subjected to government’s regulation and public policy’s influence, operated and survived under the supervision and regulation of the government. While, government’s regulation and public policy influenced the profits of the enterprises through price control, quantity control or enterprise resources quantity and distribution control, intervention of enterprise entering, exiting the market and changing the cost of enterprises. It is a key incentive for executive’s political behavior.In this paper, enterprises’ executives (chairmen or managing directors) elected as the member of National People’s Congress (including national, local) or the member of National People’s Congress (including national, local) were defined as the political promotion of the executives. Using the method of combining normative and empirical research, the political promotion of the executives’ effect to enterprises’ value were studied. Selected the stock markets of Shanghai and Shenzhen listed companies from2000to2010as the initial samples, used the Excel2003, SQL Server2000software screening of the original data, finally determined57sample companies and57matching companies as the research object.Based on that combined with actual situation in China, selected (ROE，Rate of Return on Common Stockholders’ Equity) as Dependent Variable. selected POE(Political Promotion of Executives), BF（Before）, NOE (The Nature of the Enterprise) as explanatory variables, while GOV_Intervention(Government intervention), PPL（Enterprise Property Rights Level）,LEVEL and SIZE as control variables, then established the multiple regression model. We used the software of SPSS17.0making the study of descriptive statistics, Pearson correlation coefficient analysis and multiple regression analysis. The results manifest that, political promotion of executives and enterprise’s value are positive correlation related and compared with the state-owned enterprise, the political promotion of executives have influence on private enterprise significantly, and greater than the political promotion of executives influence on state-owned enterprise.The value of this paper is that investors can measure enterprise development situation better through the political promotion of executives and has a more profound understanding to the executive’s political behavior of the listed company. To differentiate the motivation of the listed company executives’ political promotion, investors can understand of the connotation of the information profoundly, and then make the right investment decisions. However, the internal control, capital structure, executives’ features (age, record of formal schooling, salary, etc) may affect the enterprise value. So managers should to consider getting an association with government carefully. They should avoid pursuing protection from government blindly and ignoring its own management.