Research On The Impact Of Political Connection And Venture Capital To Firm’s Performance

Practice of Sino-foreign economic development shows that SMEs are an important component of the national economy, and is a key force in promoting the country’s economic development. In china, SMEs are the direct driving of economic development, especially after the financial crisis Of2007, the country will gradually increase the attention of small and medium enterprises. At the present stage, china is an emerging and transitional market, and its institution characteristics are similar with many other transitional economies in the following features:the legal system is not perfect; government infringes on corporate property rights frequently; financial repression and market access restrictions, private enterprises are subject to policy discrimination; minority interests are not adequately protected. In this condition, survival and development of SMEs are facing severe tests, how to promote the development of SMEs and improve the performance of enterprises have also begun attracted the attention of governments and scholars.The experience of SME in western developed countries shows that enterprises with venture capital can help solve their financing difficulties, as well as provide non-capital value-added services to portfolio companies, such as business management, which are playing an important role in increasing the enterprise performance. In china, venture capital started a little late. Now the Capital market is immature and the legal system is also not perfect, which makes the venture capital industry is still in the early stage of development. Under this condition, private enterprises will actively look for other alternatives. Throughout the history of the development of SMEs, private SMEs will use political connections to get financial support and preferential policies, etc. Political connections as an alternative mechanism play a significant role in promoting the performance of china corporate. Under certain conditions, venture capitalists and political connections can help enterprises to solve their financing problems, whether there is conflict between these two paths? Based on the questions on this issue, combined with such special political background of china, this paper studies the impact that political connections and venture capital put on enterprises’ performance from theoretical and empirical aspects.Firstly, on the base of systemly collecting and combing literatures, this paper reviews the researches of political connections and venture capital in the theory and practice. Secondly, this paper analyzes the operation mechanism of political connections and venture capital put on enterprises’ performance in theory.Then testing the hypothesis by empirical studies. The results show that political connections and venture capital have a positive impact on business performance, while political intervention would have a regulating effect on venture capital to corporate performance. Finally, on the base of our existing institutional background, and put forward its own ideas.This paper is divided into five chapters, as follows:The first chapter is the introduction. The purpose of this chapter is to introduce the study of writing ideas and frame structure, laying the groundwork for the later. The second chapter is literature review. Combined with china’s actual conditions, conducted a review of the literature from four levels, then make a briefly evaluation. The third chapter is the theoretical analysis. This chapter focuses on the theory of political association and the venture capital put on enterprises’ performance. The purpose is to lay the foundation for the later hypothesis. The fifth chapter is the conclusion and outlook of this paper. According to the results of empirical research show that political connections and venture capital have significant impacts on enterprises’ performance, and political intervention would have a regulating effect on venture capital to corporate performance. The research and analysis in this paper for the study of the theory and practice of risk investments have important implications and significance.