Abstract

Based on the data on the listed Chinese private companies, this paper explores the political connection’s scale and efficiency effect. The empirical studies show that the political connection has positive scale effect, and it leads firms to invest more and grow faster. On the other hand, the political connection has negative efficiency effect, and it reduces firms’ capital and labor productivity. The reason for these two effects lies in the political connection’s resource effect. With political connection, the firm can more easily to access the fanatical market and enter the regulated industry.