Analysis About The Relationship Between The Political Connection And Enterprise Performance

Since reform and opening-up, China’s private enterprises achieve a miracle development from weak to strong and become an important part of economic transition.But it also faced many difficulties in development process.Except off-grade product cycle, environmental factors, there is also has a common restriction factor, that is the law and the backward system construction, and it makes an unbalance economy and society also can not get effective configuration of resources.But our government controlled lots resources and has some power to distribute it, the enterprise in order to get these resources are tend to establish a relationship with the government.Political connection has an important influence on enterprise’s production and business operation, financial policy, operating performance and capital market. Many researches proved that political association is a kind of valuable resources, it can lower company’s cost of business licenses, get more government subsidies, obtain loans with low-interest and so on, which benefits the value of enterprise.But it also cost the enterprise a lot to get the political association, on the one hand, in order to connect the government officer it may inevitably increasing much non-productive expenditure such as catering, entertainment, business trips, bribery, on the other hand, officials may also impose some of the obligations on companies for the sake of his reputation and career, such as force the enterprise to promote employment, increase employee salaries and other benefits, it takes much burden on our company.Therefore,weather the political association has a positive or negative influence on small or medium-sized enterprise is uncertain, this needs further examination.The article do the research based on 411 enterprise with the year from 2008 to 2014, trying to explore the influence between "political association-the associated costs-enterprise performance".Study found that small and medium-sized enterprises are keen on establish connection on the government officials in order to get informal relational contracts of support and protection.Political associated enterprises’non-productive expenditure is significantly less than the affiliated enterprise, if we controlled the cost of the staff cost and non-productive expenditure the political related enterprise performance more better.On one hand the political association will increase the cost of the enterprise, on the other hand it has some negative influence on the enterprise, so what is its true relationship? We think the relationship between political association and enterprise performance relationship is not a single linear, but a curve "U" hape that different with the change of the cost.