Political Connections And Corporate Performance

Since 13th Five-Year,the information technology service industry in China has been growing and becoming an important economic growth point in China.However,the information service industry in China is also facing many challenges at the same time.The industrial structure is not reasonable,the unbalanced development of the information service industry in the East and West and the fierce market competition are still the main problems that perplex the development of information service industry in China.In China,in the context of transition economy,the government's intervention in the economy and the control of the resources are still very serious.Therefore,enterprises urgently need to deal with the relationship with the government,to facilitate the development of enterprises and to promote the long-term development of enterprises.However,in order to maintain this kind of friendly relationship with the government,enterprises need to pay a certain "rent seeking" cost,which will greatly increase the operating cost of the enterprise.Moreover,the production and operation of the enterprise and the social value will be affected once the officials who have political connections with the enterprise have been investigated and dealt with as a result of the violation of the law and discipline.Therefore,the establishment of political connections may accelerate the development of the enterprise,and may also be a factor restricting the development of the enterprise.Based on data from 2012-2016 years of information service listed companies,this paper discusses the relationship between political connections and business performance of information service industry in China.This paper uses the method of combination of theoretical analysis and empirical research,based on the comprehensive analysis to the related theory of political association and enterprise performance on the assumption that the related research,and establish multiple linear regression model,an empirical study on the relationship between political connection and corporate performance and the institutional environment,and draw the following conclusions:(1)For the information service enterprises,the political association of the managers has a restraining effect on the enterprise performance.The results show thatthe information service industry will pay huge rent seeking costs by establishing political connections and maintaining good relations with the government,which will have an adverse impact on corporate performance.(2)Compared with the central political connection,the local political relevance has more obvious restraining effect on the performance of the information service industry.Although most of the production and operation activities of information service enterprises are managed by local governments,such enterprises themselves are protected by national policies.The establishment of political connections with local governments will increase the rent-seeking cost of enterprises,and ultimately have an adverse impact on corporate performance.(3)The relationship between the political association and the enterprise performance in the information service industry will have different effects on the quality of the system environment.In the areas with better institutional environment,the promotion of the political relevance to the growth of enterprise performance is weaker than that of the poor institutional environment.