Abstract: In recent years, the organization embedded in private enterprises has become a political and economic phenomenon that cannot be ignored. However, the role of the organization in private enterprises is still a neglected aspect in the academic circle. Based on the manually collected data of organization activities, this paper examines the economic consequences of the embedding of organizations from the perspective of corporate financial irregularities. The result shows that the organization embedding has significantly restrained the non-compliance of the private enterprises, and its possible mechanism is to enhance the participation and attention of the senior executives to the organization. Furthermore, this relationship is more pronounced when executives are Party members, politically connected and during politically sensitive year; This relationship is also more pronounced in companies with higher agency costs, poorer information environments and greater financing constraints. The above results are still valid after controlling the possible endogenous problems. The conclusion shows that the organization embedded in private enterprises can help improve corporate governance and provide important inspiration for the reform of “strengthening the grassroots organization construction” proposed by the 19th National Congress of the Communist Party of China.

Key words: organization embedding, financial violation, private enterprise