The Research On Relationship Between Financial Support And State-owned Holding Listed Companies Business Performance

The relationship between the government and the market has always been an importantissue that can not be avoided in the process of world economic development, and it has alsobeen the core issue of fiscal studies. The economist John Maynard Keynes says that there willbe a failure on the market, so the government must implement necessary and appropriate levelof intervention. As an important part of the market, the activities of enterprises are bound bythe government. Financial support as a direct means of government intervention in the marketis the main aspects of the relationship between government and corporate financial. In China,most of listed companies are restructured from the former state-owned enterprises or othergovernment-controlled entities, so the government background of the decision makers lead toform the inseparable interests’ relationship between the listed company and the government.When state-owned enterprises have to take the policy burden, the government may supportthem through fiscal return, tax refunds, tax cuts and interest relief and other financial supports.The level of efficiency of financial support depends on the degree of information asymmetrybetween the government and enterprises, but the economic consequences of the financialsupports decide the fiscal policy-oriented, the function of government governance and capitalmarket efficiency of resource allocation. With China’s accession to WTO, the depth of themarket economic reform included the reform of the fiscal and taxation system,governance-improvement and development of capital markets, it is an important issue whichis worth studying whether the financial support of the government become more rational.However, there have been literature is mainly to the goal of financial support, influencefactors and longitudinal change, but seldom to the horizontal comparison of financial supportfor research. Current regulatory strengthening makes corporate earnings management effortsand the government’s soft budget constraint weakened, such as ST and PT system, IPO systemand financial grants accounting standards implementation. Therefore, concerns on therelationship between the results of operations of the state-owned holding listed companies andfinancial support are able to clear the government financial support conception of the degreeof attention on the quality of the business under the premise of maintaining the status of the main body of the state-owned economy, and explore whether rational financial relationshipbetween the government and the enterprise in depth the situation of China’s market economicreforms. It has important significance to further improve the fiscal and taxation systems andnorms of governance, promote the development of capital markets, improve the efficiency ofresource allocation, as well as analyze of the process of China’s market.Based on theoretical analysis and decision-making model, this paper systematicallyanalyzes the factors when the governments make decisions on financial supports, and selectsthe period2007-2011, the Shanghai and Shenzhen A shares of the state-controlled listedcompanies as the initial samples, adopts EXCEL, STATA and other measurement software,uses correlation analysis, regression analysis and other statistical methods, tests therelationship between the results of operations of the state-owned holding listed companies andfinancial supports to provide more evidence for the study of the behavior and the way ofcorporate earnings management, while trying to play a reference role on the governmentdecision-making in the financial supports under the financial crisis. Finally, based on theresults of the qualitative and quantitative analysis, we present the conclusions of this studyand possible future expansion of the field.This paper selects the period2007-2011, the Shanghai and Shenzhen A shares of thestate-controlled listed companies as the initial samples, under the control of thestate-controlled factors, the empirical results indicate that changes in the relationship betweenthe government financial supports and the state-controlled listed companies prior yearoperating results were significant in the same direction but in consideration of the policyburden would still support loss-making enterprises. This is distinct from the motives ofprevious studies that suggest that the local governments have financing and licensingmotivation in competition. With China’s accession to WTO, the depth of the market economicreform included the reform of the fiscal and taxation system, governance-improvement anddevelopment of capital markets, the government pay more attention to the support for highquality, strong profitability of state-owned holding enterprises,。Financial support is not themeans of the competition, and the relationship of the government and enterprises becomemore rational. This article should be further study the problem of government financialsupport and corporate governance, such as management turnover theoretical and empirical analysis.This paper has some shortcomings reflected in two aspects. Firstly, the company’s equityinterest in the nature of the control is not to distinguish between the central government orlocal governments, and here the difference in decision-making for the actual governmentfinancial support may be some impact. Secondly, for the government financial support forlisted companies, some may just out of the corporate debt levels and growth considerationsand these factors could not be further be reflected in the empirical analysis and control. So itmay cause some impacts on the conclusion.