Statistical Analysis Of The Determinants And Effects Of Fiscal Subsidies Appropriated To List Companies By Chinese Government

Fiscal subsidy is money given to enterprises or individuals as compensation by government in order to achieve specific political, economic and social objectives. Companies which have to keep sales prices lower than costs or consumers who have to spend more on necessities for price raising can get fiscal subsidies in a certain period of time.。State government can use fiscal subsidies to adjust the distribution of income and regulate the national economy and social activity. Fiscal subsidy is an effective financial policy tool. It aims to achieve Government industrial policy objectives, promote economic growth, encourage regional economic development, and accelerate enterprises technological advancement.Fiscal subsidy policy has been carried out in China since 1953.It has played a very important role in Chinese social and economic activities since"Reform and Opening up". But it also has many drawbacks: first, the amount of subsidies increases too rapidly; second, the types of subsidies are not appropriately arranged; third, the proportions of subsidy are not fair. Compared with foreign enterprises, Chinese firms have smaller size, weaker innovation ability and less competitive power. Therefore, this paper starts from the most important part of fiscal subsidies: enterprises subsidies. After reviewing and analyzing profit reports of listed companies, I find that the subsidy income and tax relief varies among firms. Some may receive a lot of subsidies and others may get fewer or even zero. What is the key factor of enterprises subsidies and how is its effect? Many literatures conducted fruitful qualitative analysis. But the quantitative analyses of enterprises subsidies are few and fragmented. In other words, the empirical researches of corporate subsidies are deficient.Under the laffont's government regulation theory ,this paper bases on the financial reports of more than 1,000 listed companies, collects the data of fiscal subsidy income of 350 representative listed companies from 2000 to 2005, then uses econometric methods to analyze the determinants of fiscal subsidies given to listed companies quantitatively and analyze the effects of enterprises subsidies in enterprises sizes, performances and technological advancement empirically. The result shows that Chinese government can financially support listed companies according to its objectives such as regional economic development, optimization of the industrial structure and economic growth etc. And to a certain extent, the fiscal subsidies enlarge sizes of listed companies; improve performance and promote technical advancement. But at the same time there are also some shortcomings, such as inadequate promotions of technological innovation which can not make government fiscal subsidies fully play its role. The government should make use of fiscal subsidies reasonably to enhance the competitiveness of Chinese enterprises.