Is political connection a panacea for corporate turnaround?—An analysis based on the resource-based view during the global financial crisis

Figures & data

Figure 1. Three-stage turnaround model.

Table 1. Definition of variables

Type	Variable	Symbol	Definition
Dependent variable	Whether turnaround	Turnaround	A dummy variable equals 1 if a firm successfully turnaround and 0 otherwise
Independent variable	Political connection	Political	Corporates’ political connection indicator.
Control variables	Marketization degree	Market	Degree of marketization in the province where the company is located, according to the marketization degree of China's provinces in 《China Marketing Index》(2011 edition) (Fan Gang, 2011).
	Property right	State	A dummy variable equals 1 if the corporate is state-owned and 0 otherwise.
	Financial leverage	Leverage	Financial leverage= (net profit + income tax + financial cost) / (net profit + income tax).
	Firm size	Size	ln (the total number of corporate employees).
	Equity concentration	Cocen	The first largest shareholder’s shares / the second largest shareholder’s shares
	Resource slack	Slack	Resource slack=net cash flow generated by operating activities / total assets to measure the redundant resources of firms.
	Corporate age	Age	A dummy variable equals 1 if corporate age is greater than industry average and 0 otherwise.
	Current ratio	Liquidity	Current ratio= current assets / current liability
	Corporate lifecycle	Life_market	A dummy variable equals 0 if the corporate is in a growth industry(the average market growth rate is beyond 10%, equals 1 if the corporate is in a mature industry(the average market growth is between 0 and 10%, and 2 otherwise.
	Regulatory Industries	Industry_control	A dummy variable equals 1 if the industry codes are B, C4, C6, D, F, G which are taken as regulated industry and 0 otherwise.

Table 2. Descriptive statistics

	N	Mean	min	p25	Median	p75	max	St.Dev
Turnaround	166	0.31	0.00	0.00	0.00	1.00	1.00	0.47
Political	166	7.72	0.00	3.00	6.00	12.00	34.00	7.59
Market	166	6.58	3.59	5.67	6.67	7.80	8.01	1.24
State	166	0.77	0.00	1.00	1.00	1.00	1.00	0.43
Leverage	166	2.34	−1.77	1.10	1.43	2.21	17.08	2.81
Cocen	166	18.86	1.03	2.14	6.97	23.37	167.81	28.72
Size	166	7.12	3.09	6.25	7.26	8.06	10.24	1.46
Slack	166	0.02	−0.25	−0.01	0.04	0.08	0.25	0.09
Age	166	0.55	0.00	0.00	1.00	1.00	1.00	0.50
Liquidity	166	0.90	0.08	0.44	0.66	0.99	5.42	0.85
Life_market	166	0.14	0	0	0	0	2	0.47

Table 3. Pearson/Spearman correlation matrix

	Turnaround	Political	Market	State	Leverage	Concen	Size	Slack	Age	Liquidity	Life_market
Turnaround	1.00	−0.16**	−0.20***	−0.18**	0.06	0.09	−0.16**	−0.02	−0.13	0.03	0.06
Political	−0.22***	1.00	0.02	0.06	−0.04	−0.01	−0.01	0.02	−0.08	−0.02	0.002
Market	−0.26***	0.05	1.00	0.05	−0.15*	0.11	−0.02	−0.10	0.07	−0.14*	−0.01
State	−0.18**	0.09	0.09	1.00	0.15*	0.18**	0.22***	0.11	−0.01	−0.18**	−0.12
Leverage	−0.002	0.04	−0.12	0.13*	1.00	0.02	0.07	0.06	0.11	−0.27***	−0.06
Cocen	0.14*	0.02	0.04	0.18**	0.10	1.00	0.06	0.07	−0.05	−0.09	−0.13
Size	−0.14*	0.005	0.001	0.26***	−0.03	0.03	1.00	0.19***	−0.06	−0.10	−0.08
Slack	0.02	0.06	−0.09	0.07	0.06	0.09	0.19**	1.00	0.06	−0.03	−0.06
Age	−0.13	−0.06	0.04	−0.01	0.02	−0.13	−0.06	0.04	1.00	−0.11	−0.01
Liquidity	−0.007	−0.01	−0.10	−0.13*	−0.12	0.02	−0.09	−0.02	−0.09	1.00	0.10
Life_market	0.05	0.02	−0.05	−0.08	0.04	−0.11	−0.08	−0.02	−0.02	0.004	1.00

*p < 0.10; **p < 0.05; ***p < 0.01.

Table 4. T-test result

Variable	Turnaround = 0	Mean	Turnaround = 1	Mean	MeanDiff
Political	114	8.83	52	5.31	3.52***
Market	114	6.80	52	6.10	0.70***
State	114	0.82	52	0.65	0.16**
Leverage	114	2.35	52	2.34	0.01
Cocen	114	16.21	52	24.67	−8.46*
Size	114	7.26	52	6.82	0.44*
Slack	114	0.02	52	0.03	−0.01
Age	114	0.60	52	0.46	−0.14*
Liquidity	114	0.91	52	0.89	0.02
Life_market	114	0.12	52	0.17	−0.05

*p < 0.10; **p < 0.05; ***p < 0.01.

Table 5. Regression result

Variable	Turnaround
	Main effect test			Robustness test
	(1)	(2)	(3)	(1)	(2)
Political	−0.043***	−0.046***	−0.045***
	(0.016)	(0.017)	(0.018)
Political_agency				−0.007**	−0.007**
				(0.003)	(0.003)
Market		−0.282***	−0.282***	−0.274***	−0.274***
		(0.090)	(0.901)	(0.090)	(0.090)
State		−0.319	−0.318	−0.256	−0.256
		(0.278)	(0.279)	(0.280)	(0.280)
Leverage		−0.004	−0.005	−0.002	−0.002
		(0.042)	(0.042)	(0.043)	(0.043)
Cocen		0.008**	0.009**	0.008**	0.008**
		(0.004)	(0.004)	(0.004)	(0.004)
Size		−0.122	−0.122	−0.128	−0.128
		(0.081)	(0.081)	(0.081)	(0.081)
slack		1.127	1.124	1.317	1.320
		(1.281)	(1.282)	(1.283)	(1.283)
Age		−0.383*	−0.383*	−0.329	−0.330
		(0.230)	(0.230)	(0.226)	(0.226)
Liquidity		−0.198	−0.198	−0.190	−0.190
		(0.157)	(0.157)	(0.154)	(0.154)
Life_market			0.038		−0.027
			(0.244)		(0.243)
_cons	0.063	3.244***	3.232***	3.109***	3.120***
	(0.171)	(0.895)	(0.900)	(0.886)	(0.891)
Industry_control	Yes	Yes	Yes	Yes	Yes
Obs.	166	166	166	166	166
Pseudo R2	0.079	0.196	0.196	0.181	0.181

*p < 0.10; **p < 0.05; ***p < 0.01.

Table 6. Regression result

Variable	Turnaround
	High degree of marketization			Low degree of marketization
	Main effect		Robustness	Main effect		Robustness
	(1)	(2)	(1)	(1)	(2)	(1)
Political	−0.030	−0.039		−0.057**	−0.070***
	(0.025)	(0.028)		(0.023)	(0.026)
Political_agency			−0.001			−0.015**
			(0.005)			(0.006)
Market
State		−0.559	−0.517		−0.227	−0.129
		(0.408)	(0.408)		(0.414)	(0.421)
Leverage		0.227	0.235		−0.032	−0.021
		(0.199)	(0.202)		(0.049)	(0.052)
Cocen		0.008	0.006		0.010*	0.010*
		(0.007)	(0.006)		(0.006)	(0.006)
Size		−0.176	−0.182		−0.113	−0.119
		(0.136)	(0.134)		(0.109)	(0.111)
Slack		0.172	0.427		2.664	3.165
		(1.940)	(1.882)		(2.000)	(2.114)
Age		−0.404	−0.292		−0.353	−0.297
		(0.374)	(0.369)		(0.332)	(0.334)
Liquidity		−0.025	−0.002		−0.417	−0.416
		(0.194)	(0.193)		(0.262)	(0.266)
Life_market		−0.105	−0.139		0.193	0.098
		(0.414)	(0.410)		(0.342)	(0.350)
_cons	−0.433*	0.970	0.741	0.653**	2.206**	2.223**
	(0.241)	(1.035)	(1.038)	(0.264)	(0.947)	(0.957)
Industry_control	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	81	81	81	85	85	85
Pseudo R2	0.052	0.135	0.110	0.148	0.247	0.251

*p < 0.10; **p < 0.05; ***p < 0.01.

Table 7. Regression result

Variable	Turnaround
	State			Non-state
	Main effect		Robustness	Main effect		Robustness
	(1)	(2)	(1)	(1)	(2)	(1)
Political	−0.032*	−0.033*		−0.115**	−0.143**
	(0.018)	(0.019)		(0.050)	(0.063)
Political_agency			−0.004			−0.025**
			(0.004)			(0.012)
Market		−0.311***	−0.306***		−0.511*	−0.426*
		(0.115)	(0.117)		(0.276)	(0.223)
State
Leverage		−0.008	−0.006		0.116	0.140
		(0.046)	(0.047)		(0.160)	(0.164)
Cocen		0.008*	0.008**		0.013	0.019
		(0.004)	(0.004)		(0.026)	(0.025)
Size		−0.142	−0.142		0.043	−0.026
		(0.102)	(0.102)		(0.198)	(0.182)
Slack		−1.309	−1.189		12.859**	14.979***
		(1.567)	(1.572)		(5.244)	(5.688)
Age		−0.421	−0.386		−0.047	0.286
		(0.272)	(0.269)		(0.607)	(0.605)
Liquidity		−0.183	−0.196		−0.322	−0.024
		(0.193)	(0.194)		(0.378)	(0.337)
Life_market		−0.153	−0.220		−0.276	−0.164
		(0.318)	(0.316)		(0.638)	(0.609)
_cons	−0.160	3.194***	3.133***	0.815**	4.311*	3.329*
	(0.204)	(1.145)	(1.148)	(0.394)	(2.448)	(1.997)
Industry_control	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	127	127	127	39	39	39
Pseudo R2	0.052	0.182	0.171	0.166	0.486	0.475

*p < 0.10; **p < 0.05; ***p < 0.01.