An Empirical Analysis about Governmental Connection and Subsidy of Government in Chinese Private Listed Firms

We know that more and more Chinese private entrepreneurs have built favorable connections with government through political participation in these years. Such a connection may be called social capital. That social capital is an investment in social connection which is expected to be rewarded in the market. In this paper, we use the data of China's private listed firms from 2002 to 2005 to examine the role of the social capital to get government subsidy, which is due to the Chinese private listed firm's political participation. The results indicate that the Chinese private listed firms with social capital could obtain important government supports, such as entering into the regulated industries more easily, devoting to the real estate industry more than others, and getting more government subsidies. This will help understand the motive that why more and more Chinese private listed firms can be expected to take part in politics.