Government Grants And Corporate Bond Financing

Local government will assist the company out of a variety of reasons. Government grant is one of the most common ways to assist the companies. Since the time of Fiscal decentralization reform, the competition between local governments has become fiercer. In order to get the resources in the local area, companies are getting more help from the local government. In the capital market, lots of companies are getting much government from the local government. Some unsuccessful companies can finance large amount of capital in the market even they are not making profit. It’s puzzling that this kind of situation happens. So in this paper I think there may be some connection between government grants and company financing. This paper has collected the government grants in different industries and areas and made a case study on Elec-Tech International Co., Ltd.This paper can be divided into five chapters. The first chapter includes introduction, the background of research, the purposes and meaning of the research, the outline and main contribution of this research.The second chapter of this paper includes review of the literature about government grants and corporate bond financing.The third chapter of this paper includes the theory foundation and the Chinese background analysis to lay the foundation of the paper.The forth chapter includes the descriptive study of government in different industries, areas. The fifth part is the case study based on Elec-Tech International Co., Ltd.The sixth chapter includes conclusions, suggestions. The seventh part is weaknesses and further research areas.The conclusions of this paper are the followings:1. the government grants are industry specific, power industry, manufacturing industry and transportation industry get more grant than other industries.2.When company cannot raise capital by rationed shares, new shares, nor convertible bonds, the company will try to get government to issue corporate bond.3. If a company wants to issue corporate with the assistance of government grants, the government grants must be large amount and consistent.4. The government grants can mislead investors.5.The government grants can lead to bad economic consequences.The main contribution of the research is the research can be suggestive guidance to investors, lenders and other stakeholders.