The Relationship Between Political Connections And Accounting Information Quality Of Privated Companies

With more and more private enterprises leaders were elected to the national, provincial and municipal or county people’s congress and CPPCC member, more and more enterprises invite government officials(once or now) to work for the company. The proportion of political connections private enterprises is increasing. It is good for optimize the external environment of private enterprises by establishing political connections with the government. It must to include the political connections when operated enterprise’s accounting information. Only this can reflect the enterprise’s development condition and actual surplus, etc.Based on political relevance perspective, the article firstly expounds the develop-ment and application status of political association in the aspects of the quality of accounting information, reviews the rent-seeking theory, information asymme-try theory and the Signal Transfer theory and Cost benefit analysis theory; then based on the specific conditions in China, it gives a detailed analysis of the motivation of Chinese private enterprises participation in politics and finds that it is multi-dimensional and multi angle, from motivation of personal demand, to motive-tion of enterprise needs, and to motivation of social needs. Later, the paper puts forward the hypothesis, and choose the A shares of private companies in Shenzhen and Shanghai, which has run the last six years from2007to2012, as samples, and studies the relationship between different political association and the quality of accounting information by using the correlation test and linear regression analysis, and also a dynamic study of the negative correlation between political connections and the quality of accounting information.The research results indicate that the political connection, from an overall look, the quality of accounting information of political connections private listing Corporation is lower than that of the non political connections; different political association influences differently:government officials political connections(PC_GOV) is not conducive for private companies to disclose the accounting information of high quality; CPC political connections (PC_CPC) is significantly positive correlated to the quality of accounting information and other background political con-nections (PC_else) has little influence on disclosure of accounting information quality. Because of China’s special economic system and the capital market environm-ent, in the post financial crisis era, the negative effect of political connections to the quality of accounting information will be more significant. In order to optimize the external environment of private enterprises, the political connections must be made disclosure by our country enterprise financial reporting system. The enterprises should weaken the dependence on government officials political connections (pc_GOV), to alleviate the negative impact between the government officials political connections and the accounting information quality.