Empirical Research Of Inherent Relationship Between Political Connection And Financial Reporting Transparency

In china’s current system background and the capital market environment, the relation between enterprises and government officials or political characters is very common, it is becoming more and more important of business and government to build political relation in enterprise management, political connection produce important influence to the production and operation of enterprises, financial performance and so on, and the financial report is just the information reflecting of the enterprise production and management, financial performance, financial report transparency report has gradually become the focus of public attention. Combined with China’s unique system and culture, the paper will sort and study on the intrinsic relationship between political relations and the financial report transparency with the method of normative research and empirical research, to provide theoretical basis and empirical evidence for the effective management of political connection and improvement of the transparency of financial reports.First, based on the sorting out and analyzing the literatures regarding the political connection and financial reporting transparency, the article respectively summary and analysis on meaning and measurement method of political connection and the financial report transparency, and based on resource dependence theory, system incentive theory, contract theory and principal-agent theory, asymmetric information theory, the theory of financial reporting quality evaluation and so on. combined with China’s institutional background, respectively analyze the affecting factors and the economic consequences of political connection and the financial reports transparency, with combination of the two inner relations, to analysis theoretically the interaction mechanism between the two, to put forward the hypothesis of empirical research; Secondly, on the basis of theoretical analysis, combining the features of the relationship between political relations and the financial report transparency, the paper research and design on the internal relationship between the two, based on sample data of Chinese A-share listed companies over the three-year period between2008and2010, the paper judge whether the listing Corporation has political connections from the aspects of whether its executives have political background, and take financial reporting conservatism as alternative variables of financial report transparency, take the political relations and the financial report transparency construction by this paper as the explained variable, take the market index, the level of tax burden, return on assets, the ratio of liabilities to assets, asset scale and the proportion of the first shareholder as explanatory variables, make the use of the univariate analysis method to analyze interaction of the political relations and the financial report transparency, quote the simultaneous equations model to test the inherent logic relationship between political association and the financial report transparency; and last proposed the effective countermeasure to governance political association, and the recommendations to enhance the transparency of financial reports according to result of the empirical analysis.