A Study On Influences Of Political Connections On The Performances Of Merger And Acquisition Of SMEs

SMEs are major part of China’s national economy and have played an important role in many aspects, such as, promoting economic development, guaranteeing full employment and promoting technological innovations. With the trend of Mergers and acquisitions (M&A), more and more SMEs have followed M&A activities under the appetence of expanding and national policies. However China’s market-economy started a little late, SMEs are still limited by the intervention of government which brings many negative impacts on M&A. In order to reduce these adverse effects, many methods and plans have been tried by SMEs. One of these important methods is building political connections to bring more benefits. Thus, political connections have been widely built and became an important resource for SMEs. With more and more focus on political, it also becomes a popular research topic. Most of the researches about political connections were still focus on the effects to the value of the company, such as the effects on performance, financing and investments. However, few researches have been done in terms of the effects on the M&A performances by political connections.This Paper studied the influences of political connections on different nature of property right of SMEs. Firstly, this paper made a summary on the domestic and foreign literatures about political association and analyzed some relevant researches by combining with "resource dependence theory", "rent-seeking theory" and "M&A theories". Then the research hypothesis was proposed, proper variables were chose and corresponding model was built. Descriptive statistics, Pearson correlation analysis, and regression analysis were processed according to the M & a data of 588 SMEs between 2007 and 2009. No matter state-owned SMEs or non state-owned SMEs.It was found that political connections will bring damage on performances of M&A no matter whether it is state-owned enterprises or non state-owned enterprises. Huge cost burden was produced when the enterprises attempted to build political connections to seek advantages of resources which brings negative impacts on performances of M&A. This paper also studied the effects of political connections of SMEs on performances of M&A under different political circumstances. It was found that the political circumstances will affect performances of political relevant M&A. Furthermore, political connections will have more negative effects on performances of M&A under worse political circumstance. According to the researches before, this paper has proposed some advices on performances of M&A of SMEs at the end.