The Influence Of Political Connection On The Long-term Performance Of The Equity Refinancing Enterprises

Political Connection has a long history and is an universal existence on space, which exists in the different stages of the historical process and different systems of the political and economic. At the same time, the external form and function degree of the political connection due to the different characteristics of different historical periods and systems of the political and economic.Because of the commonness and individuality of political connection, lots of the international scholars have studied this subject, the political connection become the hot topic of the company’s financial research.Although the economic system reform has produced results, the private economy has gotten recovery and development, the private enterprises still at the low-end position of free distribution, the survival and development of private enterprises still face system obstacles in China. Most private enterprises are in an attempt to establishing and maintaining the close relationship with the government and obtaining competitive resources, in order to overcome the survival and development of obstacles.For a production-oriented enterprises, the future of production statement and business operation conditions decides the quality of the enterprise operating decision; And for an investment company, its investment efficiency and effectiveness determines the quality of the enterprise investment decision directly. For most enterprises, the production and investment are both co-exist, it is difficult to accurately distinguish between whether they belong to the manufacturing enterprises or the investment enterprises. Therefore, this article doesn’t distinguish types and starts research from two external performances of the long-term performance of the private listed companies:long-term business performance and investment efficiency, and puts the equity refinancing of private listed companies as specific research objects to inspect the political connection how to affect business performance and investment efficiency of the private listed companies.The article is based on the stock markets of Shanghai and shenzhen from2008 to2011, puts164for equity refinancing of private listed companies as the research objects and takes the "hand of plundering-hand of supporting" of the political connection the political connection as the theoretical basis, in order to analyse the effect of the political connection on the long-term performance of private listed companies. Regression results show that the long-term operating performance of the sample companies are significant declined under the influence of the political connection. The results show that the loss of the plunder of political connection of private listed companies over the interest of the political connection. At the same time, the costs of private enterprises in obtaining and maintaining the political connection are more than the benefit from the political connection.In this paper, how will the political connection affect the investment efficiency, which still bases on the above samples as the research objects and starts from the theory of resource effect and the theory of the "hand of plundering-hand of supporting", to analyse the status of investment efficiency of the private listed companies affected by the political connection. On the one hand, based on the theory of resource effect, the private enterprises make use of the competitive advantage of political resources to developing the investment field; On the other hand, the government takes advantage of the hand of plundering to takeing up the capital of value creation through the political connection, in this way, the ability of enterprise investment is weakened. Through empirical study, the effect of the hand of plundering is more significant, so the investment efficiency is declined by the political connection.Integrated the above two conclusions, the article argues that the political connection have a negative impact for the long-term performance. On the one hand, the political connection cause the loss of the operating performance; on the other hand, the politcal connection reduce the investment efficiency.Private listed companies in China need to distinguish between value activities and non-value activities, weigh the two types of activities on the utilization ratio of taking up enterprise resources; At the same time, update investment ideas of the private listed companies and grasp the best investment opportunities.Our government need to further improve the mechanism of the formal and regularize informal alternative mechanisms; Our government should progress factor market, capital market and commodity market of marketization process steadily. Then the government must create an equitable, open and fair external environment for the private listed companies.