State Ownership, Political Connections, and Corporate Performance: A Research Based on Chinese Private-controlled Listed Firms

Abstract

Abstract:

Unlike previous literatures that treat private entrepreneurs' political participation as an important way of political connection, this study introduces another mechanism of political connections, state ownership in private-owned enterprises. We use a dataset of private-controlled listed companies in China, and empirically investigate the political connection effects and mechanisms of state ownership in private-owned enterprises. The results show that state ownership in private-owned enterprises, just like entrepreneurs' political participation, can improve firm's performances. This is because state ownership relies on its links with the government and helps private-owned enterprises to obtain a number of economic resources. We also find that political participation of entrepreneurs will become less valuable in obtaining economic resources and improving firms' performances if the private-owned enterprises have state ownership. This indicates that the political connection effect by state ownership is built on the institutional-level, and plays a better role than private entrepreneurs' political participation in personal-level. This study provides a new perspective to understand the influence of mixed structure on private-owned enterprises in China's economic transition period, and extends the research fields of corporate political connection.

Key words: state ownership, political participation of entrepreneurs, political connections, mixed-ownership structure

Yu Han, Yang Zhonglun, Song Zengji. State Ownership, Political Connections, and Corporate Performance: A Research Based on Chinese Private-controlled Listed Firms[J]. , 2017, 29(4): 196-212.

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