Political Connections、Media Supervision And Corporate Governance

In our country, the economy is still in the transition period with imperfect legal system and under-developed capital markets. In order to seek development and get access to scarce resource, companies need to make contact with the government who can help improve the corporate performance. However, in this exceptional political system, the government plays a "strong intervention, weak governance" role.The political resource increases the burden of corporations, interferes with their daily operational decisions and weakens the effectiveness of the governance mechanism. With the growing power of the media, it plays a more and more important role in the corporate governance. The media has an effect on the supervision and regulation by means of the public pressure. Using the event of CEO turnover and performance improvement of the corporations as the starting points for the research, this paper examines the impact of political connections and media supervision on the corporate governance based on the sample of337special treatment companies.The main research contents of this paper are as follows:Chapter1is the introduction of research background, research significance, research framework and the innovation of this paper.Chapter2is the literature review. This chapter summarizes literature review on the management turnover, political connections and the media.Chapter3is the research design, including the theory analysis and research hypothesis, sample selection and data sources, the definitions of variables, and the introduction of research models.Chapter4is the empirical results. This chapter examines the impact of political connections and media on the probability of CEO turnover and the future performance improvement by multiple regression analysis.Chapter5is the conclusions and implications. This chapter summarizes and makes policy recommendations, pointing out the limitations of this paper.The main conclusions of this paper are as follows: First, the political connections decrease the likelihood of the replacement of CEOs after poor performance of the corporations. Though the performance is an important indicator to supervise and evaluate the CEOs’efforts, the political connections can weaken the effectiveness of this governance mechanism of corporations. Second, the future performance of the companies where the CEOs are forced to leave is better than others. Then in the companies where the CEOs remain in office, the future performance of the politically-connected companies is worse than others. Third, the media supervision plays an important role in the corporate governance. Though the political connections can protect CEOs from being fired after poor performance and hinder future performance improvement, these effects are reduced as the increase of negative media coverage.According to our results, though the political connections intensify behavior of the government and weaken the effectiveness of the governance mechanism of corporations, the media supervision can restrain the behavior of politically-connected CEOs and improve the corporate governance. Therefore, the listed companies should be aware of the adverse effects due to political connections and strengthen governance mechanism to supervise and restrain the behavior of politically-connected CEOs. Then the staff of the media industry should strengthen the sense of responsibility and self-discipline and make efforts to improve the quality of the media reports. As for the government, on the one hand, it’s necessary to protect the legitimate powers of the media which can help create a favorable external environment for the development of the media. On the other hand, the government is supposed to publish corresponding policies to prevent the media from abusing its powers which can enhance the credibility of the media and promote the rapid development of capital markets.