Political Connections Of Professional Managers In China’s Private Family Business And Firm Performance

Company’s political connections got concerned in recent years, the political connection of "key executives" can bring policy benefits such as tax incentives and the convenience of financing to firms, which is helpful to improve business performance. Referring to some related literatures, this paper tries to extend the executives limits, which used to define the political connection of company, from "key executives"(such as the actual controller, chairman, president or CEO) to professional managers, discussing the connection between the political connections of professional managers and firm performance in private family business. For depth research, this paper introduced government intervention and legal protection to study how professional managers using their political connections. On the other hand, this paper introduced family firm style(include nuclear family firms, and extended or composited family firms) to study the effects of using professional managers’ political connections in different family firm styles.Using922samples of Chinese private family business during2004to2010listed in SMEs and GEM, we find some meaningful conclusions. Firstly, this paper studies the relationship between political connections of professional managers and firm performance, the result shows that the political connections of professional managers are quite helpful to improve firm performance. Secondly, while introducing institutional environment variables into our study, the result indicates that in province which having more government intervention or less legal protection, professional managers are eager to use their political connections to improve firm performance. Lastly, while introducing family firm style into our study, the result shows that the firm performance benefits more from the political connections of professional managers in nuclear family firms, otherwise the firm performance benefits less from the political connections of professional managers in extended or composited family firms. Furthermore, while the extended family members have position in TMT, the professional managers get more trouble in using their political connections to improve firm performance. Our study shows that the political connections of professional managers in private family firms is helpful to improve firm performance with the same to the political connections of "key executives", but having different behavior patterns. In addition, our study also shows that the political connections is also affected by the family firm styles, which inform us that the factors from family members should be take into consideration while study the political connections of professional managers.