Corporate Lifecycle,Political Connection And Non-efficiency Investment

Investment is the basic premise for the survival,development,and profitability of an enterprise.It is an important means for the enterprise to control risks,and it runs through all phases of the company's life cycle development.When an enterprise wants to enter a new industry or develop new products,it must conduct investment activities.The correctness of investment decisions will directly affect the development of the enterprise.Through investment,enterprises achieve asset optimization configuration,form the production and management capabilities,and lay the foundation of obtaining future economic interests.Effective investment can bring positive profits to enterprises and bring new impetus to operation.Ineffective investment is a waste of resources and may lead to bankruptcy or be combined.Therefore,reducing excessive investment and underinvestment,improving the efficiency of investment is crucial for the survival and development of the company.As an informal system factor,political association may help in financing channels,investment opportunities,tax incentives,etc.It may also result in loss of corporate value due to high political rent seeking costs and government intervention.In recent years,scholars have done a lot of research on the division method of the company's life cycle,which provides a basis for the study of investment efficiency from a dynamic perspective of enterprise development.Based on the above analysis,this paper studies the linear relationship between political connections and the non-efficiency investments,the type of corporate political and investment efficiency,in growth stage,maturity stage,and decline stage.I use normative research and empirical test to study.First,I sorts out the empirical measurement methods of the main research variables in this paper,which provides theoretical support for variable measurement and empirical test.Second,I untangle the literature about the relationship between political connections,investment and corporate lifecycle,and review theories including rent-seeking theory,information asymmetry theory,agency theory.Based on the theories,I put forward three research hypotheses.Then,I screen Chinese A-share listed companies from 2012 to 2016 as samples,to explore whether political connections can affect the investment efficiency.And introduce corporate lifecycle,to examine the relevance of non-efficient investment and political connections from the perspective of dynamic development of enterprises.On this basis,we further distinguish official political association and representative political association,and examine whether the type of political association affects its role in non-efficient investment.The conclusions of this paper:(1)Political association is a double-edged sword for enterprises.Political association lead to higher over-investment and lower under-investment;(2)After introducing corporate lifecycle variables,I find that political association can significantly exacerbate over-investment in growing and mature companies,significantly alleviate under-investment of firms in mature and declining periods;(3)Further distinguishing the type of political association,I find that exacerbating over-investment is related to representative political connections,and alleviating under-investment is related to official political connections.The research conclusions of this paper enrich the research on the influencing factors of non-efficiency investment of enterprises in different life cycles,and provide suggestions for the enterprises to solve the problem of non-efficiency investment from the dynamic perspective of enterprise development.