Abstract

Political connection is a popular topic in the financial academia. We are interested in the relationship between political connections and firm’s value in Chinese listed companies and we attempt to find the possible approaches that would impact political connected firm’s value. Furthermore, we would investigate the impact that changes before and after the financial crisis, since Chinese government carried out the 4 trillion bailout plan in 2008.

The results exhibit that political connections have both positive and negative impacts on Chinese listed firms. The investigated possible approaches shows that net asset per share of political connected firms have positive impact on firm’s value; however, the growths of political connected firms have insignificant impact on firm’s value. Prior to financial crisis, political connections have insignificant impacts on firm’s value; after the crisis, political connections have significant positive impacts on firm’s value.

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