The Impact Of Enterprises' Political Connection On Short-term Performance And Long-term Value

In the national economic development,the relationship between government and market has always been a key problem difficult to avoid.Although China has made good achievements since the reform and opening up,there still exist many problems in the market system,immature market,imperfect laws,policies of government intervention to the enterprises,and so on.The instability of policy environment brings development risk,even survival crisis,to enterprises(especially non-state enterprises).Compared with state-owned enterprises,non-state enterprises are more motivated to establish political connections with the government to obtain key resources.Different from building political background,the way to establish political connection through philanthropy becomes more and more recognized.Whether the enterprises rent-seeking,institutional incentives and resource dependence initiative to establish strategic philanthropy,or to meet government objectives,forced by government pressure and passive charitable donations in order to seek institutional environment stability or risk aversion,this political connection in line with social responsibility values,but also meet the needs of government and community.Therefore,this article creatively use philanthropy to measure the degree of political connection,established by a passive or active political association.Then,to study the impact on non-state enterprises'short-term financial performance and long-term value.It not only has theoretical significance,but also has practical significance for firms'strategy planning about philanthropy and political connection.In this paper,the literature analysis,theoretical analysis and empirical research methods are combined to analyze the above issues systematically and in-depth examination,in order to draw useful conclusions.Firstly,it combs the related literatures of political connection and philanthropy,political connection and enterprise performance or value,finds out that not only no unified conclusion on the measurement of political connection in academic circles,the impact on corporate performance and value is also divided.Then,based on the theories of resource dependence,stakeholder,and political connection theories,this paper analyzes the internal transmission mechanism of political connection and philanthropy,and puts forward the hypothesis of research on corporate performance and value.Finally,we select the data of listed non-state companies in Shanghai and Shenzhen stock markets in 2010-2014 years as samples,excluding financial and insurance companies,ST companies,backdoor listed companies and data missing companies.Getting the unbalanced panel data which has five years a total of 4649 companies-annual observations.Then the logistic analysis,fixed effect regression and mixed OLS regression are earried out by using STATA12.0.,to establish the econometric model and research hypothesis for empirical test.Thus,the main conclusions are as follows:(1)The factors that affect the non-state enterprises'philanthropy are more complicated.The influence of marketization level on the possibility of philanthropy varies according to geographical distribution.In the eastern region,the higher market level,the more likely to donate,but less possibility of politically motivated.While the central and western regions show that the lower level of marketization,the greater the possibility of philanthropy,the easier to establish political connection.Eastern region is more sensitive to marketization than the west.In addition,corporate profitability,size and asset-liability ratio significantly affect the behavior.(2)In the current period,the political connection can significantly promote the overall financial performance of non-state enterprises,they through the government' association to obtain more policy tilt,so as to promote product sales,improve their return on assets.The profitability of enterprises has also been greatly enhanced with the enhancement of political affiliation.non-state enterprises through philanthropy to establish political connection,this approach meets social responsibility needs,and whether active or passive,there will be legal,reasonable and legitimate.It can help non-state enterprises improve short-tem financial performance,achieve financial goals in the course of business.(3)In the long run,the political connection does not significantly promote the corporate value,but inhibit it.The impact varies from different regions.In the place which economic and social system is imperfect,the non-state enterprises can really obtain more benefits and bringing long-term added value by building the political connection.But in a well established institution,the higher market opening,the higher cost of rent-seeking enterprises,the lower corporate value.(4)The political connection of non-state enterprises is different in different development stages.In the three years before and after listing,it promotes enterprise value,but not significant.After three years of listing,it damages the value,cost can't get the corresponding benefits.