A Study On Local Government Subsidies’Influence Factors And Effects

It is a universal phenomenon that the local government subsidizes listed companies in China, and its forms are various, Government subsidies is an important tool for local government to intervene in the economy, and it also produces a significant impact on the capital market. However, in China studying on government subsidies has just started by academia, and mostly focused on ST enterprises and loss-making enterprises, yet it has not reached the same conclusion. Because of China’s special economic system, state-owned enterprises are closely connected with the government and own the inherent advantages, while private enterprises are treated unequally in terms of investment and financing, industry access and so on. So through private enterprises studying government subsidies will further deepen the study of the government-enterprise relations content.This paper will focus on local government subsidies and its implementation effect, using2008private listed companies from2007to2010as samples, from new points--political connections, firm size, industry characteristics to study local government subsidies influence factors, as well as this paper will study the implementation effect of the government subsidies from the point of the economic and social effects, exploiting logistic regression model and linear regression model as empirical analysis, we get the following conclusions:(1) Enterprises which have political connection with local government can get subsidies easier and more than those, which do not build political connection;(2) Large scale enterprises are easier to get the attention and more subsidies from local government;(3) Mechanical equipment and instrumentation industry, IT industry are not only easy to obtain local government subsidies than other industries, and subsidies significantly higher amount than other industries; electronics industry, pharmaceutical and biotech products industry compared to other industries have bigger chance to get government subsidies; the real estate industry is not only difficult to obtain government subsidies than other industries, and the subsidy amount is less than other industries; Policy industry such as agriculture, forestry, husbandry fishery, electricity, gas and water production and supply do not particularly favored by the government;(4) The operating performance of private enterprises which get local government grants will be significantly improved in the next year, that means local government subsidies have achieved economic effect. At the same time, tax revenue and the number of employees of private enterprises which obtained government subsidies increased significantly in the following year. That means local government subsidies have achieved social effect.Innovation of this paper:This article targets at private listed companies to study the effect factors and implementation effect of government subsidies; Introducing and redefining political connection to study the government subsidies; In-depth analysis from the point of view of government subsidies category, industry characteristics, enterprise features; Effect of government subsidies include not only economic effects, but social effects.Revelation of this paper:Establish a sound and transparent government subsidies system; Improve and standardize accounting related government subsidies; Promote fairness in local government subsidies.