Political Resource And Corporate Investment Efficiency

Most domestic literatures define the informal relationship between government and enterprise based on the previous work experience of executives.They think those managers or board members who have worked in the government(military)or have been elected as NPC representatives(CPPCC members)could bring convenience for firms to build political connections and get corresponding resources.While some academics measure political resource by geography,their studies are more focused on the macro level like regional economy.From the aspect of officials,this paper treats governors and provincial party secretaries as potential political resource to enterprises located in their hometown.A-share listed firms from 2003 to 2012 are used to examine the effect of political resource on real investment and inefficient investment behavior.Characteristics of firms and officials are also considered to provide a more comprehensive interpretation on the correlation between political resource and corporate investment.Based on literature reviews and social reality,this study logically analyzes the issues and proposes the corresponding hypotheses.The empirical results show that provincial officials contribute to the over-investment of firms located in their home cities,while have no effect on the under-investment behavior.In the area with lower marketization degree,there are larger gap in the level of over-investment between firms located in the provincial officials’ home cities and those not.Among firms in the home cities,only state-owned enterprises’ investments are influenced by provincial officials.Besides,compared with provincial officials born in northern regions,those from the south are more likely to promote firm’s investment in their home cities.Considering the position,only governors have influence on firms’ investments in their hometown.No matter whether provincial officials’ hometowns are in their jurisdiction or not,firms in home cities have higher investment level and lower investment efficiency.Those findings provide some enlightenment to the reform on the market,state-owned enterprises and performance evaluation system.