A study from the University of Portsmouth reveals how high-level political connections can boost the value of corporate cash holdings. Analyzing nine years of data from 16,706 Chinese companies, the researchers found that firms with politically powerful board members enjoy better access to resources and investment opportunities, which increases the market’s perception of their cash reserves.
The key lies in the type of connection. Directors with senior roles in China’s civil service—such as central government positions—make a noticeable difference to a company’s fortunes. In contrast, those with lower-ranking political ties bring little benefit.
While the study focuses on China, its lessons apply more broadly. Wherever politics and business overlap, companies can gain an edge by leveraging high-ranking connections. But not all political links are equally valuable, the researchers warn. “Political capital isn’t one-size-fits-all,” they note. “Only top-tier influence tends to deliver results.”
Worrying signs
The findings come at a time of growing concern about the overlap between government and business. Recent controversies highlight the risks. In the UK, businesswoman and peer Michelle Mone faces allegations of using her position to help a company linked to her family win pandemic contracts worth hundreds of millions of pounds. In the US, Elon Musk’s appointment to co-chair Donald Trump’s new Department of Government Efficiency (DOGE) has raised questions about how much sway the billionaire might hold over policies that could affect his businesses.
“Political influence can fuel economic growth and strengthen companies,” the study concludes. “But it needs careful oversight to prevent corruption and misuse.”
The researchers suggest steps for both businesses and governments. Companies should evaluate the specific political clout of their board members and use high-level ties to strengthen their strategies. Policymakers, meanwhile, should ensure these connections benefit the broader economy, not just private interests.
As the line between business and government blurs, the challenge is clear: find ways to make political connections work for the public good while preventing abuse.
