Research On GDP Competition,Growth Incentive And Corporate Financial Behavior

Gross domestic product(GDP)is an important indicator of the economy of a country or region,and its growth is usually used to assess the economic development and health of the country or region.Many important decisions in a country(government budget and monetary policy),and corporate decisions(such as capital investment)are influenced by the level and growth of regional GDP.As GDP is one of the core indicators that Chinese officials are most concerned about,the growth of regional GDP will also affect the administration and behavior of local officials.However,domestic and foreign literature about the impact of GDP growth incentive on micro enterprises is still limited,and our understanding of how GDP competition pattern among local governments affects the intervention motivation and behavior of local officials is still vague.As an important factor of external operation and development,the regional macroeconomic environment is also the key factor that affects the decision-making of enterprises.The correlation between financial elements of enterprises and GDP growth under different GDP statistical accounting approaches provides a suitable method and institutional scenario for us to understand the external influence of GDP competition on corporate behavior and decision-making from the perspective of government intervention.Based on competition pattern of regional economy development after fiscal decentralization in China,we take the effect of GDP competition among local governments on firm decisions as main test logic.Using the relevance between GDP accounting statistics caliber and micro enterprise financial elements,we emphatically focus on the corporate capital investment decisions and efficiency,input and output of corporate innovation and corporate earnings management behavior,and further study the impact of the intervention induced by GDP competition on the behavior of corporate operation decision and its economic consequences.It greatly expands the research stream on the interaction between macroeconomic and micro enterprise behavior.It also makes up the theoretical gap in the existing literature about the influence of intervention motivation caused by GDP growth pressure on micro enterprises.The main contents and research conclusions are as follows:Firstly,in the introduction,we make a general introduction to the research work of the whole paper.First,since China's macroeconomic data have been challenged by the outside world for a long time and the objective reality that GDP development is the first-order matter in different regions,this paper explains the necessity of studying the influence of GDP competition on the behavior and decision-making of micro enterprises,and puts forward the research background and significance of this paper.Then,this paper introduces the research content,layers and methods,and sorts out the research framework of this paper.Finally,based on the mapping relationship between GDP competition and corporate behavior under different GDP accounting approaches,as a research entry point,this paper introduces the differences from prior studies and the possible contributions and characteristics of this paper.Secondly,we elaborated the theoretical basis related to the research content of this paper and reviewed important related literature.First,the chapter 2 of this paper introduces and analyses the theoretical basis with the research theme,including the government intervention theory,tournament theory,economic growth theory,neo-institutional economics theory and corporate finance and accounting theory.Then,this chapter reviews and summarizes the literature on government intervention,macro and micro interaction,corporate capital allocation and efficiency,corporate earnings management and firm debt financing.Through the review of relevant theories and literatures,this paper outlines the theoretical framework and literature foundation of this paper,and discusses the shortcomings of existing literature and points out the relevance between these literatures and this paper.Thirdly,we carry out the institutional background analysis based on the economic and political reality in order to provide the basis and support for the theoretical analysis and empirical tests of the follow-up work.The chapter 3 mainly analyses the economic and political background of the formation of GDP competition pattern among local governments.First,this chapter introduces the development process from centralization to decentralization of local fiscal power in China since the reform and opening up,the development process and current situation of the official promotion and assessment system,and the main motives of local government intervention in firms.Then,we discuss the behavioural reaction and decision-making ways of enterprises to react to government intervention actively or passively,and the relation between GDP statistics and financial elements of enterprises in China.The analysis of these institutional backgrounds is the important premise and foundation of the empirical work.Fourthly,from the three dimensions of capital investment and efficiency,innovation input and output,and earnings management,we examine the specific impact of government intervention on corporate financial behaviour and decision-making under the competitive pressure of GDP.Regional GDP growth performance is an important performance indicator for local governments and officials.Although scholars have queried the GDP-oriented mode of economic development,we still lack systematic empirical evidence as theoretical support for realizing the influence of GDP competition pattern among local governments on the behaviour of micro enterprises.Much less is known about GDP competition could affect what kind of corporate decisions and how is the consequences.Based on the internal correlation between China's GDP statistics and the financial elements of enterprises,through the research in chapter 4,5 and 6,this paper finds that: 1)firms tend to increase investment expenditure no matter under the pressure of GDP competition in the whole country or in the neighbouring provinces.Firms with GDP competition show more overinvestment than firms without GDP competition;2)firms tend to reduce R&D investment both in nationwide and adjacent-wide GDP competition.Firms with GDP competition produce fewer patents than firms without GDP competition.GDP competition mainly affects innovation input and output of enterprises through reducing the level of risk-taking desire and increasing the degree of enterprise over-investment;3)compared with firms in provinces without GDP growth pressure,firms located in provinces with GDP competition pressure tend to have a higher level of upwards earnings management.More specifically,under the pressure of GDP competition,firms are more likely to conduct upward earnings management by increasing corporate revenue,increasing inventory scale and deferring impairment loss of assets.Earnings management caused by GDP competition has costs for enterprises,which will eventually lead to higher bad debt losses,inventory depreciation and asset impairment losses in the future and lower return on total assets(ROA).In order to exploit the potential mechanism,we also consider the ability and motives of government intervention in moderating the relation between GDP competition and corporate behaviour,we main find that the effect of GDP competition on capital investment,corporate innovation and earnings management is more pronounced in state-owned enterprises and firms in the areas with lower marketization process.Fifthly,from the perspective of resource compensation,we examine how GDP competition affects the maturity structure and cost of corporate debt financing.Through the research in chapter 7,we find that when enterprises located in provinces where GDP growth is at a disadvantage,they are more inclined to carry out debt financing and obtain more long-term loans,but the cost of debt financing does not decline.The results show that when local governments are under great pressure from GDP competition,they will compensate firms for the costs of financial resource allocation in the process of promoting GDP growth through the quantity of credit resources.In the cross-sectional tests,we find that the positive effect of GDP competition on long-term debt is more significant in state-owned enterprises,firms in areas with lower credit distribution liberalization,and firms with senior executives who once worked in banking industry.Further tests show that the increase in long-term loans brought by GDP competition does not improve corporate performance.Finally,we propose the research enlightenment,conclusion and prospect.Based on the research conclusions of the previous chapters,the chapter 8 of this paper puts forward suggestions to government departments from the aspects of actively transforming the evaluation system of local officials' performance,accelerating the implementation of the unified GDP accounting system,and establishing and improving the regional legal system and environment to restrict ineffective government intervention.Suggestions are put forward to the enterprise departments from the aspects of accelerating the reform of mixed ownership of state-owned enterprises,implementing the capital authorized operation and management system,and establishing the market-oriented decision-making system of state-owned enterprises.For market participants,we suggest that the process of value judgment should be not divorced from the regional economic situation and understand the financial information behind the institutional factors.In chapter 9,after summarizing the conclusions of all the research works in this paper,we point out the shortcomings of this paper and gives some suggestions on the future research direction.Taken together,the research of this paper is innovative and exploratory.Combined with the basic theory and relevant institutional background,this paper combs the micro-role channels of government intervention in corporate behavior under the pattern of GDP competition.In the dynamic process of GDP competition among local governments,it effectively captures the motivation,opportunity and mode of government intervention.Since the reform and opening up,China's economy has grown by leaps and bounds,and local governments and officials have played a key role.But in the process of development,there will also be externalities at the firm level.At the micro level,this study systematically provides empirical evidence on the way through which firms cooperate with the government's GDP management,and reveals the negative impact of GDP competition on the efficiency of corporate behavior decision-making.The conclusion of this paper provides an important theoretical support for the government to promote the transformation of rough economic development mode and reform the GDP oriented official assessment system.