The Impact Of Political Connection On The Performance Of Private Listed Company Of China

In recent years,private listed companies actively involved in politics, building political connection to deal with imperfect market as a protection mechanism. However, that political connection has positive effect or negative effect on company performance has been being debated among the academic circle. At the same time, political connection is influenced by the situation embedded in private listed company, having different characteristics because of the political system, economic system, market characteristics and corporate governance environment, which shows a strong dependence of the situation. Corporate governance is widely considered as a key situational factor. While the ownership structure, the main factor of corporate governance efficiency, has regulating action on the relationship between political connection and company performance.This study uses a panel dataset of 796 China’s private listed companies over the period of 2010-2014, applying panel fixed effect regression model and multiple instrumental variable 2SLS regression model to examine the relationship between political connection and company performance and the regulating action of ownership structure as situational factor on the relationship between them. The empirical results show that:(1) Under the same conditions, the performance of political connection companies is lower than that of non-political connection companies, and the degree of political connection is negatively correlated with company performance, the higher the degree of political connection, the lower the company performance is.(2) The ownership concentration degree has a positive regulating action on the relationship of political connection and company performance. The negative effect of political connection on company performance is restrained by a certain degree. This negative relationship is weakened.