Influence Of Investing Political Connected Firms On Mutual Fund Performance

According to the China Securities Investment Fund Association,as of the end of December 2018,there were 120 fund management companies in China,and the total net assets of the managed public funds totaled 12.17 trillion yuan,equivalent to27.90% of the stock market value of the year.The Chinese public fund industry has played an important role in the people's economic life.The impact of research fund investment preferences on performance can help investors make investment and financing decisions with other capital market participants and provide empirical evidence to policy makers.Political connection is a common phenomenon in the economic development of various countries.In the process of China's economic transformation,the company obtains resource convenience by chasing political relations,and the competitive advantage and the company's value are enhanced,so that the companies with political connections have investment value.But the trade-off between the company's political connections and capacity building not only affects the quality of the company's long-term development,but also weakens its investment value.Therefore,the research on the performance of the political association of fund investment companies can not only enrich the research data on the active management of fund performance,but also provide empirical evidence for policy makers to set the financing rules of political affiliates.In addition,the research on fund performance in this paper can also provide institutional investors with an investment strategy reference in the academic sense.This paper uses the political background of executives to describe the company's political connections,and uses the ratio of the political context of executives(PC)to the number of political connections among executives(PC_rate)to measure the strength of the company's political connections,and then use the culling ETF.,QDII,umbrella funds and graded funds outside the public equity investment fund from the2008 to 2018 portfolio semi-annual report data,using the market-weighted average of the political affiliates in the fund portfolio to describe the fund preference investment politics Associated Companies Index(PPI).This paper firstly examines the impact of fund investment political affiliates on fund performance in different computing cycles through double fixed effect panel regression.Then,in the Fama three-factor model with political correlation simulation risk factor(CMD),it invests in political affiliates according to fund preferences.Index(PPI)sorting and grouping regression,toinvestigate whether investing in politically-linked stocks can bring excess returns;finally,considering the industry deviation of fund holdings and the characteristics of team-managed funds can inhibit the irrational factors in the investment process.Influence,this paper examines whether the characteristics of funds contribute to the performance of fund-invested political affiliates through panel regression based on cross-sectional trait differences.This paper finds that funds that prefer to invest in politically-linked companies can create higher yields,but the positive impact of fund-invested political-related companies on yields diminishes and decreases significantly over time.In the end,the paper draws the following conclusions:(1)Funds that prefer to invest in politically affiliated companies create higher yields in the short-term than funds that are not preferred to investment political affiliates,but this positive impact is not significant in the long run.At the same time,the paper also found that the nature of the company's equity will also affect the relationship between fund investment preferences and fund performance.(2)Funds that prefer to focus on investing in certain industries and invest in politically-related companies in the short to medium term have a positive impact on fund performance.(3)Team fund managers invest in political affiliates with better fund performance than individual fund managers of the same investment political affiliates.The conclusions of this paper are useful for the construction of fund managers' portfolios and enrich the literature on fund performance research.