TY - JOUR
T1 - Government subsidies, rent-seeking and corporate investment efficiency
T2 - Evidence from China
AU - Jiahui, Xu
AU - Naysary, Babak
N1 - Publisher Copyright:
© Xu Jiahui, Babak Naysary, 2021
PY - 2021
Y1 - 2021
N2 - Despite a large number of government subsidies, Chinese listed companies still face numerous challenges. This requires research into the effects of government subsidies on corporate investment efficiency. The paper provides empirical evidence to investigate investment efficiency and enriches the study on the interactions between government intervention, rent-seeking, and ownership structure. Generalized least square (GLS) models with fixed effects were constructed using 2012-2020 data from 869 Chinese listed A-share non-financial firms. Results show that government subsidies received by listed companies significantly damage investment efficiency (β =.138, p < 01). This can be attributed to their rent-seeking behaviors to obtain subsidies, which also significantly harms investment efficiency (β =.915, p <.05). Government subsidies are also found to significantly mediate the impact of rent-seeking on investment efficiency. In three-step regression for testing mediating effect, coefficients are 0.475, 0.915, and 0.131 at the level of 1%, 5%, and 5%, respectively. Furthermore, ownership structure shows a moderating effect in the relationship between subsidies and investment efficiency. The management shareholding ratio significantly reinforces the negative impact (β = 1.369, p <.01), while the institutional shareholding ratio shows no significant moderating effect (β = 0.0571, p = n.s). Non-state-owned enterprises show a more significant negative impact (β = 0.17, p <.05) than state-owned enterprises (β = 0.148, p <.1). Finally, the study tests the above relationships for companies in the manufacturing industry that receive the most percentage of government subsidies in China, and the results are robust.
AB - Despite a large number of government subsidies, Chinese listed companies still face numerous challenges. This requires research into the effects of government subsidies on corporate investment efficiency. The paper provides empirical evidence to investigate investment efficiency and enriches the study on the interactions between government intervention, rent-seeking, and ownership structure. Generalized least square (GLS) models with fixed effects were constructed using 2012-2020 data from 869 Chinese listed A-share non-financial firms. Results show that government subsidies received by listed companies significantly damage investment efficiency (β =.138, p < 01). This can be attributed to their rent-seeking behaviors to obtain subsidies, which also significantly harms investment efficiency (β =.915, p <.05). Government subsidies are also found to significantly mediate the impact of rent-seeking on investment efficiency. In three-step regression for testing mediating effect, coefficients are 0.475, 0.915, and 0.131 at the level of 1%, 5%, and 5%, respectively. Furthermore, ownership structure shows a moderating effect in the relationship between subsidies and investment efficiency. The management shareholding ratio significantly reinforces the negative impact (β = 1.369, p <.01), while the institutional shareholding ratio shows no significant moderating effect (β = 0.0571, p = n.s). Non-state-owned enterprises show a more significant negative impact (β = 0.17, p <.05) than state-owned enterprises (β = 0.148, p <.1). Finally, the study tests the above relationships for companies in the manufacturing industry that receive the most percentage of government subsidies in China, and the results are robust.
KW - A-share firms
KW - Capital allocation
KW - Corporate performance
KW - Government intervention
KW - Ownership structure
UR - http://www.scopus.com/inward/record.url?scp=85122731095&partnerID=8YFLogxK
U2 - 10.21511/imfi.18(4).2021.31
DO - 10.21511/imfi.18(4).2021.31
M3 - Article
AN - SCOPUS:85122731095
SN - 1810-4967
VL - 18
SP - 380
EP - 392
JO - Investment Management and Financial Innovations
JF - Investment Management and Financial Innovations
IS - 4
ER -