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Political Connections and Enterprise Performance of Private Enterprises in China: Impacts and Mechanisms

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  • Yang Wen
  • Guo Feng

Abstract

Researchers have not come to an agreement on the impact of political connection on enterprise performance although this issue draws much attention. This paper attributes the above phenomenon to lack of precise classification of various political connection types in China. Based on existing literature, this paper divides political connections into current political connections and former political connections, and identifies their own hierarchy. Empirical study using Chinese Private Enterprise Survey data shows that different sorts of political connections all contribute to enterprise performance, and internal governance plays the mediating role. Overall, this paper may make marginal contributions to the study on the relationship between political connections and enterprise performance.

Suggested Citation

  • Yang Wen & Guo Feng, 2020. "Political Connections and Enterprise Performance of Private Enterprises in China: Impacts and Mechanisms," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(10), pages 1-86, October.
    • Handle: RePEc:ibn:ijefaa:v:12:y:2020:i:10:p:86
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    References listed on IDEAS

    as
    1. Alexandra Niessen & Stefan Ruenzi, 2010. "Political Connectedness and Firm Performance: Evidence from Germany," German Economic Review, Verein für Socialpolitik, vol. 11(4), pages 441-464, November.
    2. Cull, Robert & Xu, Lixin Colin, 2005. "Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms," Journal of Financial Economics, Elsevier, vol. 77(1), pages 117-146, July.
    3. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    4. repec:bla:germec:v:11:y:2010:i::p:441-464 is not listed on IDEAS
    5. Zhou, Wubiao, 2009. "Bank Financing in China's Private Sector: The Payoffs of Political Capital," World Development, Elsevier, vol. 37(4), pages 787-799, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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