Polictical Connection,Executive Stock Ownership And M&A

Political connection is a common phenomenon in the world,especially in China's special economic system,the establishment of such a relationship between the government and the enterprise is more common.Many enterprise managers are influenced by thousands of years of Chinese feudal culture in the "official standard"thinking,decision-making behavior of managers is not a purely economic behavior,sometimes with some political enthusiasm impulse.And China social legal construction and the reform of the economic system is still in the development stage,in this particular background,establishing and maintaining good relationship with government is more important than the long-term development of the enterprise for many managers.There is no doubt that political connections can bring many benefits to the enterprise,but these benefits are not the result of market competition,and even distort the behavior of enterprises,making the management into the construction of deviate from core competitiveness,just like a drug damaging the competitiveness of enterprises,the long-term development will eventually be impeded.Because there is a natural political relationship between state-owned enterprises and the government,it is more meaningful to study the relationship between the political connections of private enterprises and the behavior or economic consequences of enterprises.Based on the theoretical research,the thesis select the M&A events and executive characteristics of private listed companies in China during 2010-2013 as sample.Firstly,the thesis study how the political connection impact of M&A frequency and degree from the mechanism of action,then study the relationship between political connection and long-term M&A performance with Event Study,finally explores the moderating effect of corporate executive stock ownership on political connection and enterprise M&A relations.The thesis attempts to study the impact of political connections on corporate activities and economic consequences,hoping to give some theoretical results on the political connections and M&A of private enterprises based on higher order theory.The study found that political connection of private enterprise and frequency or degree is positively correlated,executive stock ownership can weaken the effect of it;in addition,the political connection can negatively affect the enterprise long-term M&A performance,executive stock ownership can also weaken the effect of it.This study is consistent with the theoretical conclusions reasoning,M&A activity may become the means for the local government and executives to.get private benefits.Political connection enterprises can take short term resources from the local government,but is not conducive to the long-term development of enterprises,enterprises should establish and perfect the management supervision and incentive mechanism,and should establish and maintain a healthy relationship between government and enterprises.