An Empirical Study On The Influence Of Private Listing Corporation Political Connections On Corporate M&A

According to the traditional "Upper Echelons Theory", Organization’s strategic choice and performance depends in part on the composition of top management characteristics and background. After that many of the study found that there is a correlation exists between top management team characteristics and organizational performance. A series of empirical researches show that, the relationship between team and organization strategy management inside enterprises affected by the ability to strategize and strategic decision-making process and the influence of other relevant factors. The size of the senior management team, is the senior management of the number of how much the influence on organizational performance. Mainly because of the team resources depend on how much the number of team members. The diversity of the team, is mainly refers to the team members of some differences in demographic characteristics on the index level, including the level of education, age, occupation, experience, professional direction and cultural background. This will directly or indirectly affect the performance levels of the organization. In general, Enterprise top managers to develop the enterprise strategic mission, so is very important to the enterprise management benefit and the development. Their technical level and ability, level of motivation, team process effect is the key of enterprise competitiveness. According to this logic, team members within the individual of the population background characteristics, including level of education and work experience, work age, family background, gender and so on. It will become the enterprise team composition and organization performance of the relationship between important factors. From the existing research results, the personal characteristics of managers have obvious impact on enterprise performance, although these effects may be due to the different management. Then the government background executives as one of the personal characteristics of managers, its influence on the performance of enterprises will also be self-evident. In China, many listing Corporation executives have the government background of practitioners, and the government working background will constitute the political affiliates.Generally speaking, the establishment of political associated enterprises can obtain other enterprises do not have advantage and resources. Such as, preferential loans, corporate tax rates and the government of all kinds of preferential policies. In this context, political connections brought about by the special resources and advantages will inevitably make some enterprises have excessive investment. Especially in countries with economies in transition, some political connection enterprises rely on their own have relationship with government background, even if the investment mistakes have led to the enterprise into financial difficulties, the government will also give priority to help themselves. So they began to the blind expansion and overinvestment. So to establish whether political connection enterprises has a tendency to excessive investment merger? If their a positive correlation between political connections and excessive investment and acquisition? However, at present no research explicitly put forward this problem. Let alone for the political association and the relationship between enterprise over-investment and in-depth theoretical analysis and empirical test. Therefore, this paper will be from the listing corporation executives government background perspective to study the political relevance of excessive investment in enterprise M&A.First of all, this paper puts forward problems to be studied and described the research background, and the significance of this research, and explains the research content and the research idea. Then, through the research status about political connections at home and abroad have made preliminary understanding and review related literature. In the literature review, First of all, both at home and abroad about the concept of political association and measure have carried on the elaboration. Secondly, analyzes the motivation of political association of enterprises and thus brings to the enterprise related advantages and resources. Thirdly, analyzes the historical background of the formation of the political association of private enterprise of our country. Based on the above literature review, we analyzed our country government, private enterprises and government background executives between the interests of the structure. And then analyzed the enterprise political associated influence enterprise investment and mergers motivation and theoretical basis. Based on this theory, the thesis puts forward the hypothesis of analysis. Later, this article will select some a-share private listed companies as samples, analyzes on the executive of government background executives on merger and acquisition investment. Through the selection of variables, model building and data collection. To validate the model and the establishment of the assumptions or not. Then carries on the analysis, summary, explain the phenomenon, and puts forward some ideas and methods to solve the problems. And on this basis put forward in this paper, we study some of the deficiencies and subsequent study and put forward some prospects for the future. Finally, I was at the time of writing long some personal experience and feelings. In the final, thank you for giving me great help in the writing process of the teachers, classmates and friends.According to the "Agency Costs Theory". The actual management of its own goals and business goals are not consistent. They may be more is the pursuit of maximizing their own interests. Because the managers of their own professional ability and other restriction level, to make the manager’s decision will not necessarily bring more value for the enterprise. Free cash flow theory suggests that managers can take the free cash flow to invest in unprofitable investment plan. But not for the redemption of debt financing part of dividend distribution, etc. Because it can increase the wealth of managers themselves.Managers tend to pursue the expansion of business scale and its position of consumption, expand their influence. Therefore, it has the tendency of excessive investment, but harms the interests of the shareholders. Due to information asymmetry and agency cost problem, perfect capital market does not exist in reality. External financing cost is higher than internal financing costs. Enterprise financing face financing constraints, leading to a company of investment-cash flow sensitivity. Companies face financing constraints, the greater the company investment is more dependent on internal cash flow. Enterprise political association to be seen as a kind of reputation mechanism, which can alleviate enterprise external financing when faced with the degree of information asymmetry and reduce the sensitivity of investment to cash flow. Therefore, based on the above analysis I put forward the following three hypotheses:The first one,in the occupation managers in the enterprise, the enterprise free cash flow is positively related with corporate mergers and acquisitions investment expenditure. Second, top management of private enterprises has the government background of enterprise for the investment-cash flow sensitivity is lower than executives no government background. Third, the relative to the executive government without professional background of private enterprises, executives with government background of the enterprises will invest more and M&A activity. In order to set up three regression model to prove that the relevant hypothesis.It can be seen from the results of a regression model. Its own cash flow and enterprise investment expenditure is positively related. Executive government background can effectively reduce the degree of enterprise investment is sensitive to internal cash flow. Executive government showed a significant positive correlation between the Executive government background variables and merger investment rate. This shows that degree of political connection of private listing Corporation executives is high, the company’s investment spending more M&A. From the regression results can be obtained, executive government background variables and their own cash flow positive correlation. This also shows that political connection with government background executives can bring more funds for the enterprise. Company executives more easily from the outside to obtain financial support, to increase the enterprise cash flow. So companies have more capital to free of investment to merger and acquisition activity. They might expect by more debt to produce greater leverage benefits. However, from the results we can see that the executive government background variables and the profitability of the company and the company had negative correlation between growths. It has the political connection enterprises more of its investment. M&A expenses did not bring economic benefits to the enterprise. On the contrary, it brings negative economic benefits for the enterprise. So we can conclude, with political connection enterprises operating performance and no higher than with no political connection enterprises.Through the above analysis, we know the enterprise cash flow impact on the enterprise investment. But the enterprise through the political connection reduces the sensitivity of enterprise investment of internal cash flow. However, too many enterprises investment and merger activity has not brought to the enterprise’s business performance. On the contrary, it reduces the enterprise operating performance. Therefore, after China’s private enterprises in related activities related to politics should be carefully considered. The political connection costs may be higher than to the economic benefits of enterprises.