Research On The Political Connection's Rights Effect And Its Influence On Firm Value

Under the background of strong government intervention and weak institutional constraints,Chinese companies may acquire channels for connecting with the government through political connections and seeking informal alternatives beyond legal protection."Political rights" effects may lead politically-connected companies to have advantages in the acquisition of resources such as loans,taxes,and fiscal subsidies.However,political connections may still adversely affect companies.This article uses the quasi-natural experiment of the resignation of independent directors according to the 18th article of the Central Organization Department in 2013,which analyzes the "political rights" effect of political associations.Using the FRDD from the perspective of political connections loss,examines the impact of political connections on obtaining benefit such as loans,taxes,and fiscal subsidies,and further examines the relevance of political connections to corporate values.The study found that the loss of political connections reduced corporate loan capacity,increased corporate taxation costs,and reduced financial subsidies,indicating that political connections played an active role in helping enterprises obtain rights such as loans,taxes,and financial subsidies.The loss of political connections increased significantly the value of the company indicating that political relationship has a negative influence on the value of the company.Despite obtaining loans,taxation,and financial subsidies,the political connection still damages the value of the company.Finally,thereliability of the conclusion of this paper is verified by replacing the enterprise value variable and double-difference method to verify and other robustness tests.Based on the above analysis,this article puts forward policy recommendations from both government and enterprises.The government should implement the legal measures in practice,and further refine the responsibility system for government officials,reduce or even eliminate the possibility of enterprises seeking rent through officials.Improve the financial system,taxation system and improve the business environment.Enterprises should recognize themselves,"focus on the main business",avoid blindly following the trend to establish political connections.The innovative performance of this article is in the perspective of research and research content.On the one hand,different from previous studies on the issue that companies have established political connections,the paper analyzes the effects of political association and the impact on corporate value from the perspective of loss of political association.On the other hand,this paper fully considers the "duality" of political connections,and based on the "rights" and "cost" effects of political connections,it comprehensively examines the effects of political connections and the impact of establishing political connections on companies.It has a reliable basis for the rights effect of political connection,and the political connection actually harms the value of the company.It has reference value for correctly identifying the role and consequences of political connection and building a new type of political and business relations.