Research On Restraint Of Economic Responsibility Audit To Local Government Inefficient Investment

At present, the surging debt of China’s local governments that caused by excessive investment attracts the great attention from central government. In order to control the financial risk, the central government constantly introduce new policies to stop many irregularities. However, the result is not satisfactory. If official of local government is unprofitable, the local government will not turn a deaf ear on the reprimand of central government. Local government is made up of local officials, and there exists the incentives of official promotion as well as the economic benefits behind the local government inefficient investment. Therefore, in order to control the inefficient investment of local government investment, we must start from the governance of local officials. Economic responsibility audit, as the tool of governance,which takes the individual officer as the audit object. It aims to supervise the implementation of official economic responsibilities, and to restrain the influence of promotion as well as the economic benefits on inefficient investment. Then, it can effectively restrain the inefficient investment of local government.Initially, this paper is based on the theory of public choice, starting from the perspective of self-interest and rent-seeking behavior to study the investment motivation of the local government officials under the incentive of officials’ promotion and the economic benefits. Also, the paper researches the operating mechanism of official power in government investment, which under the decision-making and execution system of the current government investment. And how the defects of the current government investment management system can provide theconditions for official rent-seeking behavior. Afterwards, from the perspective of official management, the paper researches how the economic responsibility audit can restrict official power, and the economic responsibility audit verify the fulfillment of economic responsibility through legal compliance and the evaluation of the implementation of officials in economic decision-making. Reporting the audit results to the relevant departments, which as the basis for the rewards and punishment of the officials. The inefficient investment will be restricted since the political future and economic beneficial of the officials will be affected. In another word, the economic responsibility audit play a regulatory role in the officials’ promotion incentives and economic interests, and corrected the negative impact of incentives.Moreover, this paper verified this inhibitory effect by empirical examination. According to the above findings, the paper ends with the policy advice that suppress the inefficient investment caused by official power abusing.There are two innovation points in this paper. Firstly, this paper connect local government investment with local officials, and deeply researching the officials’ motivation, operating power and implementation conditions in inefficient investment, which can enrich the study about the formation of local government inefficient investment.Secondly, the paper researches how economic responsibility audit can constraint official power, and provides a new perspective for the expansion of economic responsibility audit’s governance function. This paper applies empirical research method to test the result of economic responsibility audit, which is beneficial to summarizing the experienceof economic responsibility audit, and provides the empirical evidence for official governance.