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| The Political Connection and Growth Value of Private Firms: A Real Option Perspective |
| YANG Jing-Jing, LAN Hai-Lin, HE Ai |
| South China University of Technology, Guangzhou, China |
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Abstract Based on real option theory, we adopt an improved calculation of growth option value and empirically shed light on the influence of two kinds of political connection, a born political background or an acquired political status, with the the former means whether actual controllers have ever worked for government and the latter indicates whether they serve as deputies to the People’s Congress or Peoples’ Political Consultative Committee after. The results show the born political background enhances private firm’s growth option value whereas political status reduces it. The finding suggest a "gets and gives" dual effects of political connections, the tie to political institutions would not bring the absolute benefit to private firm as expected and private firm’s strategy has become increasingly marketdriven and combined with the development of marketsupport institutions.
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Received: 04 January 2012
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2012, Vol. 9 
