The Relationship between Entrepreneurial Political Connections and Firm's Market Performance: The Perspective of Signal Theory

Abstract

Abstract:

The results of past researches on the relationship between entrepreneurial political connections and firm's market performance are ambiguous. They regard the nature of financial performance and market performance as the same. The argument of this paper is that entrepreneurial political connections communicate beneficial signals which impact firm's market performance. Using the data set of Chinese listed private firms from 2003 to 2011, the results show that the market performance of the firms whose entrepreneurs own political connections are better than those whose entrepreneurs do not own political connections. After categorizing the political connections, there are not similar results. Through analysis of the multiple political connections, this study demonstrates that the market performance of the firms whose entrepreneurs own political connections are better because their entrepreneurs own no single but two and more kinds of political connections. This paper corrects the imperfections of the past researches which mix the financial performance and market performance, and fills the gap that they only investigate the single rather than multiple political connections.

Key words: entrepreneurial political connections, firm's market performance, signal theory

Liu Lin. The Relationship between Entrepreneurial Political Connections and Firm's Market Performance: The Perspective of Signal Theory[J]. , 2016, 28(3): 93-105.

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