Board Leadership Political Relevance, Agency Costs And Investment Efficiency

In recent years, China’s private enterprises has been an unprecedenteddevelopment, has played an increasingly important role in promoting China’seconomic development process. The level of efficiency of a business investment,directly determines the good or bad performance of the enterprise. However, China’senterprises, compared with foreign enterprises widespread investment is not efficient,enterprise resource wasting, which naturally also includes private enterprises as animportant part of national economy, it is necessary to study the factors that affect theefficiency of investment. Existing research remuneration, soft budget constraint, debtgovernance functions, managers background characteristics, as well as managers fromthe shareholding structure, and manager’s overconfidence multiple perspectivesinfluencing factors of excessive investment or investment empirical test found theabove factors for corporate investment behavior in varying degrees. However, due tothe unique system, there are many obstacles is not conducive to the development ofprivate enterprises, such as: private enterprises compared to state-owned enterprises togovernment policy support is relatively small, a lot of the industry does not allowprivate enterprises to enter private enterprises financing difficulties restricting thedevelopment of private enterprises. Political association, as an informal systems andmechanisms, if a private enterprise has a political association, companies can get a lotof convenience, such as more government policy support, financing facilities, taxincentives. Therefore, private enterprises seeking political association, and efforts toestablish contacts with the government, has become China’s particular economicenvironment that private enterprises to circumvent these adverse factors and thus aneffective way to break through the barriers of the industry. Political associationbecomes an important factor that affect the efficiency of private enterprise investment.This paper studies the relationship between private enterprises in theleadership of the Board of Directors in the different forms of political association andagency costs, and then examine the relationship of agency costs and investmentefficiency of the different forms of political association. Political relevance of datacollected by hand to obtain, this paper, using empirical research methods throughempirical testing, the following conclusions:(1) Members of the board of directors of private enterprises has a political association, especially as the leader of the board ofdirectors, chairmanor general manager of a political association, will be moreconducive to long-term development of the enterprise.(2) The leadership of the Boardof Directors, the chairman of a political association or political association chairmanand general manager are the same person and can effectively reduce the agency costsbetween the board and management.(3) The leadership of the Board, if just thegeneral manager of a political association, it will increase agency costs.(4) Theefficiency of agency costs between shareholders and management and enterpriseinvestment in private enterprises are negatively correlated.(5) And private enterprisesin the leadership of the Board of Directors, the chairman of a political association orchairman of the board and general manager for the same person, and of a politicalassociation, can weaken the negative relationship between the agency costs and theefficiency of investment.(6) And private enterprises in the leadership of the Board ofDirectors, if only political association is the general manager, it will strengthen thenegative relationship between the agency costs and the efficiency of investment.