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Political Connection, Soft Budget Constraint and Over-investment——Based On the Empirical Study of Private Listed Companies |
QIU Yizheng |
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Abstract Selecting the observations of A-share private enterprises listed in Shanghai and Shenzhen Stock Exchanges from 2007 to 2012, this paper investigates the soft budget constraints and over-investment in private enterprises with political connections. The results show that: the issues of soft budget constraint and over-investment do exist in private enterprises with political connections. Investigating the impact of the intensity of political connections on these problems, we find that the impact of different levels of political connections on soft budget constraints and over-investment may differ, in which the soft budget constraints and over-investment in private enterprises with provincial level political connections would be more serious. This paper has some significant implications in improving the market mechanism and the transformation of government functions.
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Received: 09 September 2013
Published: 15 March 2014
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Corresponding Authors:
QIU Yizheng
E-mail: qiuyiz@163.com
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