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The Effect Of Political Connection On Corporate Performance Of Private Companies

Posted on:2016-03-07Degree:MasterType:Thesis
Country:ChinaCandidate:C Q YueFull Text:PDF
GTID:2296330467475029Subject:Accounting
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Since we followed the policy of reform and opening up, private enterprises have become the engine of the regional economy and industry. But because of the local protectionism, entry barriers and discrimination against private enterprises, the private enterprises are faced with the hostile operating environment. From the process of the private enterprises’development, we can see that more and more private enterprises depend on some alternative informal mechanisms to compensate for these shortcomings. They hope to get the support and protection which they cannot get from the law and the formal mechanisms. Political association is one of the alternative informal mechanisms.Political connection is a very common phenomenon around the world. The domestic and foreign scholars have already realized the importance of political connection to corporate performance, and plenty of researches have been done. But that the political connection can increase or decrease the corporate performance is still a problem. So we think that studying the problem is meaningful. At the same time, previous studies did not involve the adjustment of the nature of industry to the enhancement effect of political connection on corporate performance. But in this paper, I consider the nature of industry as a moderating variable.This is one of the innovation in my paper. In the mean time, I use assignment method to measure political association. Not only did I consider the political ranking, but also the administrative level. This is also an innovation of this article.Based on social capital theory, resource dependence theory, the substitution mechanism theory and the theories of "grabbing hand " and "helping hand ", we put forward three research hypotheses, and selected A-Shared Listed private enterprises during2011-2013as the research sample. Then we build3models, and test the three hypotheses proposed in this paper. According to the results of the empirical study, we draw the following conclusions:(1) Private enterprises’corporate performance is significantly affected by political association This shows that political association in private enterprises can bring resources and conditions which are necessary for the enterprises’development, and can also promote the private enterprise’performance.(2) Differences of institutional environment between different regions affect the relationship of political association and company performance. We view the level of marketization, government intervention and legalization level as the substitution variables of institutional environment. Our study found that in the area of low level of marketization, high government intervention, and weak legal system level, company’s political association play a bigger role in corporate performance.(3) In addition to the institutional environment that can affect the relationship of political association and enterprise performance, nature of the industry can also affect it. We divide private enterprises into monopoly industry and non-monopoly industry and found that in non-monopoly industry, the positive effect of political association on corporate performance is much more significant than that in the monopoly industries.According to the research results, we put forward the following suggestions:(1) Private enterprises should take the initiative to establish political ties with the government.(2) Private enterprises should use the political association reasonably.(3) The government should actively improve the institutional environment.(4) The government should correct attitude towards the private enterprises in monopoly industry.Although there are some innovative points in my paper, my article still has the following drawbacks:(1) The assignment method to measure the political correlation degree is subjective and can’t be very accurate.(2) There are some limitations for not viewing the unlisted private enterprises as the research sample.(3)We are unable to accurately measure the recessive political association.
Keywords/Search Tags:Political connection, corporate performance, Institutional environment, Nature of industry
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