The Empirical Research On The Relationship Between China Private Listed Company’s Political Ties And Firm Value

Companies with political links rendered increasingly widespread trend at the global level. Scholars all over the world have focused on the definition of political connections, methods of measurement, impact studies, and many other areas. In some aspects they have reached some consensus, but differences remain on issues such as the relationship between the value of the company and political ties. In our country, political connections also widely exist in private enterprise. Political connections have become the reality which private enterprises have to face, and even determine the success or failure of private enterprise management. In this context, research on political ties and the value of the company has an important influence on the development of private enterprises in China.Based on the history and reality of our country, this article picks out private listed companies from the2012China Economic Research Institute combined with wind info produced "representatives, members of company a shares market capitalization ranks" and carry out an empirical analysis of their political connections and the value of the company. In345samples obtained in the company.60%of the private company has political links, including Chairman of politically-linked companies accounted for83.77%of the total sample and there are nearly half of companies where chairman with re-election. In addition to referring previous research, this article for the first time considers the phenomenon that the president may be considered for a second term in this situation, and perfect describes the concept of political ties from a vertical perspective.This article does regression with political connections strength and the proportion of board of directors with political links as an independent variable, Tobin Q values (tq), the rate of return on equity (roe), performance evaluation indicators (f) as the dependent variable, but results show that regression coefficients are not significant. Though hausman test, we find there are significant endogeneity in political connections and firm values. Therefore, we select the provincial levels (including) led to the frequency of inspection of the company as an instrumental variable and use a two-stage regression method to solve endogeneity problems. After controlling endogeneity problems, empirical results show that the political ties of private listed companies have a positive effect on company value, that is, higher degree of political contacts, the company’s operating performance is better.This innovation is expanding the concept of political contacts and selecting the tool variable in empirical analysis to control endogeneity effect, which enriches the field of research and has a certain degree of enlightenment and significance for private listed companies and the government, also has importance for achieving the healthy and rapid development for the Chinese economy.