Research On The Relationship Between Political Connection Of Private Enterprises And Earnings Quality

Senior executives play important roles.in the operation of the company.In China,due to historical conditions,state-owned enterprises and the government have always been closely linked,and private enterprises can only rely on their own efforts to establish political connections(such as hiring a political background senior executive.Talents or active candidates for the election of deputies or members of the Chinese People's Political Consultative Conference to avoid risks and gain certain benefits.Therefore,when the company's senior executives serve as NPC deputies or CPPCC members,the company is defined as having political connections,and vice versa.The political connections of enterprises will cause them to face smaller market pressures,resulting in weaker incentives for enterprises to improve earnings quality and affecting the development of China's market economy.At the same time,due to policy and geographical factors,there are significant differences in the level of economic development and marketization in various regions of our country.In areas with better marketization,the information is more open and transparent,and external supervision can effectively reduce the number of companies trying to gain interests through political connections.In order to study the relationship between corporate political relations and earnings quality in China,it is necessary to take into account the differences in the process of marketization between regions in China.Based on rent-seeking theory,social capital theory and government intervention theory,this paper studies the relationship between corporate political connections and earnings quality in China,and divides the political connections into deputies to the National People's Congress and members of the Chinese People's Political Consultative Conference,explore the relationship between political connection and earnings quality.At the same time,this paper introduces the process of marketization as a regulatory variable to explore the regulatory role of the process of marketization on the relationship between the two variables? Considering that state-owned enterprises have innate political connections,this paper selects private listed companies in China as the research object,and conducts empirical research on the basis of data from private companies listed on the Shenzhen and Shanghai A shares from 2010 to 2014.The empirical research results show that: First,there is a significant positive correlation between the company's political connections and the level of earnings management.Among them,there is a significant positive correlation between the political connections of the NPC deputies and the level of earnings management.The political connections between the political consultative committee members and the level of earnings management are positively related.Second,the degree of marketization has a significant negative regulatory effect on the relationship between political ties and earnings management,the degree of marketization has a significant negative regulatory effect on the relationship between the political connections between the deputies of the National People's Congress and the level of earnings management,the relationship between the Political Contact of the CPPCC members and the level of earnings management does not have a significant regulatory effect.The study analyzes the relevant results and puts forward corresponding suggestions,namely,improving.China's market system,accelerating the construction of marketization in China,narrowing the gap in the process of marketization in each region,and promoting the steady development of private enterprises in the market.Strengthing the external supervision of the company and forming an external restraint mechanism to improve the quality of the company's earnings.