The Relationship Between Government Subsidies And State-owned Under Financial Crisis

The relationship between state-owned and subsidy is always a hot issue investigated by many scholars, also being a valuable issue in transition economy especially. As one of the main government intervention method, subsidy has been a most investigated issue for a long time., however, most paper related is investigated in a normal environment, seldom investigated in an extreme environment such as financial crisis. In different environment, the strategies and business philosophy of companies are different from those in a normal environment. The goal and methods of government are different in different environment as well. This paper focuses on the relationship between subsidy and state-owned based on the2008global financial crisis. This paper also hopes contribute to the theory of government intervention.The paper’s main contents include as follow:The first part:The main overview of study on the local government subsidies and listed companies including the reality of the subject background, purpose s and meaning, present the study method, structure and features.The second part:the review and comments on the research results and status at home and abroad, which are related to government subsidies in recent years.The third part:the theoretical basis, institutional foundation, motivation are described and analyzed, as for the theoretical groundwork for the back of the empirical analysis later. On the other hand, this chapter gives an introduction on the institutional back knowledge related to government subsidies.The forth part:The chapter mainly lays the root for the following issues, mainly use the decision-making model as the basis. Focusing on motivation of government subsidies, this part derives the both sides during subsidy decision-making from different angles. Through the analysis of the effectiveness of different matrices, observe the decision-making behavior to arrive at the main research hypothesis. The fifth part:First is the general introduction about the empirical model and selections of relevant variables, followed by a brief description of the sample selection process, data sources and empirical analysis period. Second, give the description of the sample data analysis, respectively from the overall sample, industry and other aspects of the data on certain characteristics. Then, use multiple regressions to empirically analysis the relationship between government subsidies and state-owned. Finally, the related robustness tests, such as variable substitution better support the hypothesis of this study.The last part:The chapter is about conclusions, generalizing main points of view, abstracting main innovations, introducing main restrictions, Bringing out policies suggestions and the prospect of further study at last.The main thinking of this paper is as followed:First, the relationship between state-owned and government subsidies is investigated in order to find out the main reason to the different amount of subsidies between state-owned and not. Secondly, investigating the inner motivation of subsidies to state-owned companies under the financial crisis based on some relevant variables such as company size, GDP, industry and so on. The main goal is to find out the reason of subsidies to state-owned companies under the financial crisis is due to paternalism or compensation to policy burden.The innovations of this paper lay in the following points:First, this paper gives a more intuitive decision analysis theory using decision theory and utility of matrix, so it can more clearly show the government and enterprises in different stages of decision-making between the utility and state, it can also provide a theoretical basis for the empirical test that local governments are motivated to help state-owned companies.Second, existed related paper is investigated in a normal environment not in an extreme environment. In different environment, the strategies and business philosophy of companies are different from those in a normal environment. The goal and methods of government are different in different environment as well. So, this paper will investigate this issue under the2008financial crisis in order to find out the mechanism of government intervention in an extreme environment.Third, the writer adds the concept of soft budget constraint to investigate the relationship between state-owned and government subsidies. The soft budget constraint can explain the results of this paper betterly.Supported by the theoretical analysis and the empirical tests based data of listed companies, the specific conclusions are as follows:First, the government will give more subsidies to state-owned companies under financial crisis. In different environment, the strategies and business philosophy of companies are different from those in a normal environment. The goal and methods of government are different in different environment as well. Under the2008financial crisis, the government will help the state-owned companies get out from mud, giving more subsidies to them compared with private companies.Second, the subsidy level has a large relationship with a company’s size, staff number and industry. The larger size a company owns, the more subsidies a company can gain. Also, a company which owns a large numbers of staff can get more subsidies from the government. Manufacturing companies can get more subsidies from the government due to the catch-up strategy policy.Last, the writer finds out that the inner motivation of subsidies to state-owned companies is mostly due to the compensation to policy burden. Paternalism is also a factor but not a main factor.