Empirical Research On The Effect Of Top Management Team’s Political Connection On Enterprise Value In China’s Private Listed Companies

Since the reform and opening up from1978, China basically completed the transitionfrom a planned economy to the market economy.Because China’s capital market is anemerging market coexisted with transition, the government has played an important role inthe allocation of social resources. Because China ’s system of property rights and legalsystem is imperfect, private enterprises’ development is inseparable from the localgovernments’ policies, documents and executive orders, which are highly uncertain.Private enterprises not only need to face the risk of fierce competition in the market, butalso directly or indirectly affected by a series of government control.Reshaping therelationship between government and enterprises has been the focus of economic reform ineconomic restructuring and the development and expansion of private enterprise areclosely related with local governments.In recent years, some scholars began to notice the effects of the economic andpolitical connection of enterprises, much research results has been done. Politicalconnection can bring some positive economic effects for the enterprise, such as: financingfacilities, policy support, tax breaks, diversification, stock issue, financial subsidies, R&Dinvestment and social responsibility, etc. These have positive significance in improvementof operating results of private enterprises. This paper analyzes the political connectionwhich brings a series of economic phenomena and summarizes the main conduction pathof the influence of political connection on the enterprise value of China’s Private ListedCompanies. In addition,we get the theoretical analysis, the research hypotheses and empirical testing on the basis of previous studies.This paper selects private listed companies in Shanghai and Shenzhen stock exchangebetween2010and2012as the research sample. By means of empirical study on howpolitical connection affects corporate value, using SPSS regression analysis software, weget the follow conclusions:(1) Political connection have positive effect on the enterprisevalue of private listed companies;(2) Central political connection’s effect is more obviousthan the local political connection on the enterprise value;(3) The higher the proportion ofpolitic connected executives, the better enterprise value in private listed companies.This study have theoretical and practical significance for the private listedcompanies.In this paper,combined with China’s socialist market economic system,we studyinto the relationship of the Political connection and the enterprise value of private listedcompanies.this paper enriches the domestic research.It also has practical significance suchas: promote the improvement of market mechanisms, build a new relationship betweengovernment and enterprises, guide China’s private enterprises to participate in faircompetition, and improve corporate governance of private enterprises.