The Influence Of Political Connection On Corporate Value

In our country,the phenomenon of political linkage exists in the listed enterprises.Government officials are often involved in the management of enterprises.At the present stage,China is in an important period of economic transition.At present,China’s market system is not perfect,the legal system and property rights protection mechanism are not perfect.The boundary between government and market is still unclear,and politics and economy often interact.In the previous studies of scholars,there is not a consistent conclusion about the relationship between political relevance and enterprise value,some scholars argue that political linkages enhance corporate value by helping firms access important scarce resources,providing informal property rights protections,facilitating financing,and offering government orders.However,some scholars believe that political association disturbs the normal market competition order reduces the R&D innovation ability and so on,and makes the enterprise value lower.Therefore,at the present stage of our country,it is very necessary to study the relationship between political relevance and enterprise value.This paper first analyzes the definition of political relevance and the motivation of enterprises to carry out political relevancerelated activities,and then summarizes the literature of different views on the impact of political relevance on enterprise value.Based on the theories of rent-seeking and resource curse,this paper selects the data of non-financial listed companies in China from 2008 to 2017,puts forward four hypotheses,and establishes relevant empirical models to test the hypotheses.This paper draws the following conclusions:(1)in China’s listed companies,the phenomenon of political relevance is widespread,and there is a significant negative correlation between political relevance and enterprise value;(2)a good internal control system can mitigate the negative influence of political connection on enterprise value;(3)the higher the degree of regional marketization,the more negative influence of political connection on enterprise value;(4)the financing constraint plays a moderating role in the relationship between political relevance and firm value,and the decrease of the degree of financing constraint can make the negative influence of political relevance on firm value smaller.