A Study Of The Relationship Between Political Connection And Quality Of Internal Control In Private Listed Firms

Upper Echelons Theory means the background characteristics of managers can reflect the psychological traits and affect their behavior. According to China’s political system, the selection of government officials, election of deputies and CPPCC members recommended consultations, managers who have political connections often associate with higher political and cultural qualities, strong sense of social responsibility, moral and noble qualities. These qualities will be through its effects on the internal control environment. So managers’ political connections may affect the quality of internal controls.This paper uses the 2012 to 2014 data of private listed companies to study the relationship between political connection and private listed companies’ internal quality control. In this paper, a company has political connection when the chairman or general manager owes political connection. The study found a political connection of private listed companies do to improve the company’s internal quality control. This paper further categorizes firms into political connection linked politically connected government officials and political connection linked representatives of members. It finds that only when the company has the type of political connection on behalf of members, their internal quality control was higher; later, this paper considers the politics connection with different categories of executives has influence on the quality of internal control, the study found that quality of internal control is higher if the chairman owes political connection.