Political Connections of Independent Directors and Firm Performance: Evidence of Chinese listed Manufacturing Companies over 2008-2013
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Changzheng Zhang, Yuefan Lv, Qian Guo
The paper investigates the effect of the political connections of independent directors on firm performance by choosing the panel data consisting of 2994 firm-years observations in Chinese listed manufacturing listed companies during 2008-2013 as the sample. Empirical analysis by adopting multiple regression analysis based on OLS by with SPSS19.0 makes a new finding, i.e, there is a positive relationship between the political connections of independent directors and firm performance measured by ROE and EPS. Further investigation shows that the richness of independent directors’ political connections improves firm performance by providing more resources instead of inputting extra knowledge, ideas or perspectives. Therefore, the political connections of independent directors has potential negative effects on firm’s long-termed competitive edge, since current richer resources would lower the recognition of the top executives on the importance of enhancing internal core competence.
Political connections, Independent directors, firm performance, listed companies