Research On The Impact Of Senior Executive Political Relation On Enterprise Financial Slack

Derived from America’s subprime crisis swept through the global market, which leads to large number of enterprise bankruptcy, including some company with good management because of temporary working capital turnover difficulty. When a significant adverse change happened in the external environment, market tends to excessive settlement behavior. Under the background of the global financial turbulence environment change, the paper based on financial slack two significant effects "to prevent adverse environmental change" and "to grasp unexpected chance", raise the necessity of enterprise keeping financial slack resources. Private enterprises build a series of explicit and implicit political relation with government to ease market system defects in market competition. Building political relation can bring political convenience to the private enterprise, but it also needs to undertake the political cost. Based on this, the paper discusses senior executive political relation impacts on financial slack level and financial slack value.This paper systematically describes the political relation and financial slack related theory, analyses the mechanism of senior executive political relation impacts on financial slack and the path of political relation impacts on financial slack. In the financial slack measurement, the paper takes single index (cash slack, debt slack) and comprehensive index (comprehensive financial slack) to measure the financial slack level of sample enterprises. Selecting private enterprises listed on Shanghai and Shenzhen stock market surviving for four consecutive years during year of 2009-2012 (except ST and ST* enterprises during sample periods), first of all, the paper observe the overall financial conditions and political relation by descriptive statistics, then examine private enterprises senior executive political relation impacts on financial slack level and financial slack value through multiple regression analysis.The main conclusions are as follows:(1)Private enterprises with political relation has less cash slack compared to none political related private enterprises.(2)Political relation does not significantly affect the level of private enterprises debt slack.(3)Private enterprises with political relation has less comprehensive financial slack level compared to none political related private enterprises.(4)Cash slack can significantly increase the value of financial slack, while debt slack and comprehensive level of financial slack show negative correlation with financial slack value. (5)Political relation does not significantly adjust financial slack effect on financial slack value.