Political Connection, Institutional Environment And Enterprise Value Distribution

The world is in a state of rapid economic develop ment, competition among enterprises has become increasingly fierce. Since the process of China's market is not perfect, the Government holds a variety of scarce resources which are needed for the enterprises development, especially those lagging behind in economic development areas. These areas are in a bad Institutional Environment, where laws and regulations are incomplete. In those places government intervenes in enterprises much deeper. To survival and development enterprises need access to a variety of resource, the establishment of political relations with the government for enterprises seems to be particularly important.Enterprises participate in the establishment of political relations with the government, at the same time they should also be actively doing business in the distribution of benefits. Because the rational allocation of corporate interests is not only related to the development of enterprises but also related to the company's survival. Firstly, we the sort and summarize the existing literature that about political association. And found that the existing literatures are only about enterprise business performance, corporate capital gains rate and so on. But there's no research about value creation from the point of Stakeholders, there's not any research about profit distribution. So this paper uses the quarterly data of C hina's A- listed companies between 2006 and 2014 as the research sample. Study the relationship among companies' Political Connection, Institutional Environment, Corporation Value and profit distribution. Results of this study show:First, China's regional economic development is very uneven; enterprises are mainly concentrated in those areas with good institutional environment and better economic conditions. But there's a few of enterprises in remote areas, and the economic are undeveloped.Second, the political relations have a positive influence in value creation. In different institutional environment the effect of political connection is not the same. And we found that the worse the institutional environment is, the effect of political connection is more obvious.Third, the political relations also affect the allocation of enterprise value, in general, compared with none political connection enterprises, shareholders and government gain less shares of interests, but employees and creditors gain more shares of interests from the enterprise. And the institutional environment will also influence the results.