The Impact Of The Revitalization Plan Of Ten Industries On Firm's Investment And Financing And Its Economic Consequences

The international financial crisis in 2008 made China's economy face a downside risk.As an important countermeasure,the Chinese government introduced the Revitalization Plan of Ten Industries in early 2009 to stabilize economy.However,although the implementation of the industrial policy has ended,the understanding of how the Revitalization Plan of Ten Industries affects the real economy is still insufficient.At the same time,it may be constrained by factors such as the scarcity of the natural experiment of industrial policy,the existing studies on how industrial policy affects the economy is often plagued by the problem of causality identification,which leads to the failure in academia to reach consensus on the influence of industrial policy.First,this paper defines the concept of industrial policy,and sorts out the literature of how industrial policy affects economy.Then,this paper reviews the evolution of China's industrial policy,and focusing on the Revitalization Plan of Ten Industries which has the characteristics of exogenous and clear coverage.On this basis,this paper conducts the empirical study from the two progressive aspects of “How the Revitalization Plan of Ten Industries affects firm investment and financing” and “The economic consequence of the change in firm investment and financing caused by the Revitalization Plan of Ten Industries”.Firstly,this paper uses the data of Chinese listed companies from 2007 to 2011 to examine the effects of the Revitalization Plan of Ten Industries on firm investment and financing behavior with difference-in-difference method.The results show that after the introduction of the Revitalization Plan of Ten Industries,compared with the companies outside the ten industries,the investment and financing of enterprises within the ten industries undergone significant changes.In terms of corporate bank debt financing,the industrial policy shock promotes the scale of bank loan.At the same time,the introduction of the Revitalization Plan of Ten Industries distorts the matching degree between bank loan and investment opportunity,thus reduce the efficiency of corporate bank credit allocation.In terms of corporate investment,the Revitalization Plan of Ten Industries leads to an increase in corporate investment scale,and distorts the matching degree between investment and investment opportunities,thus reducing the efficiency of corporate investment.In terms of corporate short-term loans and long-term investment,after the introduction of the Revitalization Plan of Ten Industries,the firms' debt financing behavior shows a clear short-term characteristic while investment has transformed from short-term into longterm investment.Moreover,since the Revitalization Plan of Ten Industries affects economy mainly through government intervention,considering the differences in government intervention capability of different enterprises,the impacts of the Revitalization Plan of Ten Industries show rich heterogeneities.On the one hand,compared with the areas with weaker government intervention,in areas with stronger local government intervention,the impacts of the industrial policy are greater.On the other hand,compared with non-state owned enterprises,the industrial policy exerts greater impacts on state owned enterprise.Secondly,on the basis of investigating how the Revitalization Plan of Ten Industries affects firm investment and financing,this paper comprehensively uses the data of firm,industry and region level from 2007 to 2011,and constructs difference-indifference models to examine the economic consequences of the changes of firm investment and financing caused by the Revitalization Plan of Ten Industries.The empirical results show that the Revitalization Plan of Ten Industries not only affects economic growth,but also exerts effects on corporate performance.On the one hand,at the economic growth level,the Revitalization Plan of Ten Industries boosts regional fixed asset investment by promoting industrial fixed asset investment,thus drives regional economic growth.From the industry perspective,compared with industries outside the ten industries,the industry shock leads to an increase in the scale of fixed asset investment within the ten industries.From the region perspective,compared with regions with lower proportion of investment in the ten industries,at the regions with higher proportion of investment in the ten industries,the Revitalization Plan of Ten Industries promotes the scale of regional fixed asset investment and regional GDP.On the other hand,at the firm performance level,the Revitalization Plan of Ten Industries leads to a significant decline in total factor productivity and market value of enterprises.In addition,compared with firms in areas with weaker local government intervention(non-state owned enterprises),for firms in areas with stronger local government intervention(state owned enterprises)experience,the Revitalization Plan of Ten Industries exerts greater influences on the corporate total factor productivity and market value.Finally,this paper summarize the main conclusions and proposes corresponding policy recommendations.At the same time,this paper illustrates the inadequacies of the study and the future research direction.This paper uses firm,industry and region data,examines the impact of the Revitalization Plan of Ten Industries on corporate investment and financing,and further explores its economic consequences at the level of economic growth and firm performance with difference-in-difference method.These studies evaluate the implementation effects of the Revitalization Plan of Ten Industries,help to clarify the mechanism of industrial policy,and provide references for the departments to better implement industrial policy.