The Influence Of "Government-Capital Separation" On The Development Of State-owned Enterprises

The reform of state-owned enterprises(SOEs)is the key point of Chinese economic reform in the process of perfecting socialist market economy with Chinese characteristics.China has experienced in the reform of SOEs since the SOEs have come through the stages of decentralization of power and profits(Fangquanran-li),the separation of ownership and control right(Liangquanfenli),the separation of government and enterprise,and establishment of a modern enterprise system.However,the reform of SOEs has not achieved its anticipated goals,because it has not solved the essential issues between the government and SOEs.The separation of government-capital,as a proxy forseparate the governmental function in social administration and the function in the management of state-owned capital,can maintain the independence of state-owned capital to a certain extent,which plays an important role in realizing the separation of government and enterprises.Therefore,the existing research points out that the separation of government-capital should be treated as the fundamental and main line in the Chinese state-owned enterprise reform,this is also consistent with the direction of state-owned capital reform in Chinese new era.How the separation of government-capital impact on the survival and development of state-owned enterprisesand how the separation of government-capital impact on the economic system reform?The research on these questions have important inspirational purpose for pointing out the reform direction of Chinese SOEs and also important for improving SOEs to be stronger,better and expanded.The theoretical basis of this studyis "the dual-structure fiscal theory",which proposed by Ye and Zhang(1999).Firstly,we analyze the existence of "government-capital mess" that confuses public finance with state-owned capital finance and examine the impact of "government-capital mess" on the survival and development of state-owned enterprises from the perspective of local fiscal pressure.Secondly,we consider that the implementation of state-owned capital operation budget in 2007 is a system construction which could realizes the separation of government and capital,so we take this as a policy shock to illustrate the role of "government-capital separation"by examining the impact of state-owned capital operation budget system on SOEs'investment efficiency.Finally,we realize that if a company located in a province and it is controlled by the government belongs to another province,the government is difficult to confuse its function in social management with the function in state-owned capital management under such Chinese-style decentralization,which we believe that the "government-capital separation" has been realized.Based on this consideration,we adopt that whether state-owned enterprises are controlled by State-owned Assets Supervision and Administration Commission(SASAC)in other region to reflect the separation of government and capital,and empirically analyzes the impact of"government-capital separation" on the performance of state-owned enterprises.Based on the above discussion,the main findings of this study are presented as follows:First,we find that the financial pressure of local governments is an important factor to affect the survival and development of SOEs under the circumstance of"government-capital mess".Specifically,at the beginning of SOEs establishment,they have the small scale and low efficiency,and also affordmuch local financial pressure.When we consider the effect of SASAC,we find that the local fiscal pressure has a greater negatively impact on the initial scale and efficiency of SOEs before the establishment of SASAC,which indicates that the establishment of SASAC could weaken the negative impact of local fiscal pressure on SOEs.Our results confirmed the important function of SASAC in promoting the "government-capital separation".Heterogeneity analysis shows that the impact of local fiscal pressure on the initial scale and efficiency of SOEs has industry heterogeneity and regional heterogeneity.We also find that the level of local fiscal pressure has a long-term negative effect on the scale and efficiency of state-owned enterprises and has greatly increased the delisting risk of local SOEs.The delisting risk of SOEs will increase by about 90%for every standard deviation of local financial pressure level.The conclusions of this study reflect the confusion between state-owned capital finance and public finance in China and reflect that "government-capital mess" has a negative impact on the survival and development of SOEs.Second,the implementation of state-owned capital operating budget system,which is conducive to achieve the separation of government and capital,has a significant positive effect on the investment efficiency of SOEs,and the positive effects are all in terms of central SOEs,provincial SOEs and municipal SOEs.Our further analysis finds that state-owned capital operating budget system has a great effect on improving the investment efficiency of SOEs in high intervention areas and those SOEs with a higher degree of soft budget constraints.In other words,reducing government intervention in SOEs and overinvestment behavior under soft budget constraints are important mechanism that the state-owned capital operating budget system could improve the investment efficiency of SOEs.Third,we find that when local SOEs are controlled by SASAC which belongs to other region can significantly improve their corporate performance,which mainly represents that SOEs controlled by SASAC belongs to other region have a higher return on assets and a greater sales growth rate in comparison with SOEs controlled by local SASAC.The results of additional tests show that SOEs controlled by SASAC belongs to other region have a greater positive effect in the SOEs with high levels of government intervention,areas with high financial pressure,and areas with poor economic development.Afterward,we use central SOEs as a counterfactual test which shows that for the sample of central SOEs,holding by SASAC belongs to other region cannot improve the performance of central SOE.The results confirm the positive effect of holding by SASAC belongs to other region can reflect the role of"government-capital separation".Compared with the prior literature,the main contribution of this study is affirmed the important role of "government-capital separation" in the reform and development of state-owned enterprises from the empirical level.The conclusions of our study provide strong empirical evidence for further deepening the reform of local SOEs,optimizing the allocation of state-owned capital,and compatibility between public ownership and market-oriented economy.