Impacts Of Political Connections Of Executives On Enterprise’s Value

Chinese private enterprises have become an important force in promoting the development of the national economy.However, due to historical reasons, the private enterprise was being discriminated against in the political system environment and financial environment. Therefore, private entrepreneurs keen to establish political connections in order to get the supports and protections that can not get from the legal and formal system, such as easier access to government regulation of industry, can gain more bank loans and longer the duration of the loan and other benefits.Political connections exist throughout the world,many researchers have found that political connections as a feature property of the enterprise would have an important impact on the enterprise’s value, like the structure of enterprise’s ownership, capital structure and business diversification. But there is no consistent conclusion on political connections can promote the enterprise’s value or damage enterprise’s value.This study purposes to examine the link between political connections and enterprise’s value in Chinese non-financial private listed firms in A Share during the year2005to2011.Many scholars have studied this issue, but they tend to ignore the endogenous problem between political connections and enterprise’s value. In order to minimize the affection of endogenous problem, the study uses the SYS-GMM robustness test and event study besides investigating the chairman separately. Finally, Empirical studies have found that political connections did not significantly impact on enterprise’s value of Chinese private listed companies.