The Research Of Trust And Political Connection With Private Enterprises Accounting Information Quality

In view of the fact that China’s market economy is transformed from the planned economy featured by a highly centralized government, the informal system has come out as another important factor that will affect the behaviors of private enterprises, besides the market factor. The paper firstly presents two important informal systems which are known as social trust and political connection and also makes a study of their mutual relationship. What is more, an overall analysis of the degree of social trust as well as the correlation between the political connection and accounting information quality within a private listed company will be also made in the paper as a means of revealing the effects of the informal system under China’s special condition upon the property and behavior of private listed companies.In order to address the issues above, the paper will choose some private A-share listed companies in the control of certain individuals during the period from2003to2012as research samples. The results of the method of multiple linear regression have verified the significant correlation between the degree of social trust and the behaviors of private listed companies. To be more specific, the correlation between the degree of social trust and the political connection with the authority has proven to be even greater, suggesting that the social trust has become an important factor to affect the political connection for a private listed company. For those regional private listed companies with a lower degree of social trust, they have shown a greater tendency to set up political connection, especially with those government officers.What is more, the paper has also verified the significant correlation between the social trust, political connection and the accounting information quality of a private listed company. Within some regions under intensified supervision and featured by a low degree of social trust, those private listed companies that have access to political connection, especially with those government officers, haven seen a relatively smaller improvement in accounting information quality. Considering that the robustness test still results in a significant regression effect, it has further confirmed the outcome we have gained out of assumptions, verifying the correlation between the informal system and the property and behavior of private listed companies.From the perspective of informal system, the paper has sought to make a study of the property and behavior of private listed companies so as to provide some reflections upon China’s efforts of transforming government function and improving market environment in the midst of transition economy and also give those related supervisors and investors a new approach to observe and evaluate the listed companies.