Government Intervention, Enterprise Property Rights And Corporate Performance

The relationship between the government and the enterprises is the focus of the academic circles, but also an important inevitable proposition of the process of economic development. Especially in those transition economies, That how to straighten out the relationship between the government and enterprises, and transform the functions of government have become the key of the process in reform and development.In China, because of the special political and economic environment, the government intervention in economic activities is very serious. The local government would intervene on the macro and micro economic activities for political promotion purpose and policy burden. Such intervention has two opposite economic effects:the grabbing hand and the helping hand. Through the provision of subsidies, tax incentives, corporate governance, mergers and acquisitions and other channels, The government would intervention operation, affect all business operation, and ultimately influence the performance of companies.Currently, there are many empirical studies on the relationship between government intervention and corporate performance, but most of them do not distinguish that the enterprise is in the normal operation or financial distress. In addition, although some domestic scholars have researched on the financial distress cost of enterprises in our countries, but they do not involve the impact between different property rights of the enterprises and company performance during the period of financial distress, and few literatures refer that when a company ran into financial distress, how the company’s internal and external factors affect on the recovery time. Based on this, from the perspective of financial distress, this paper takes the Chinese listed companies which ran into financial distress during the period of2007-2012as research sample to study the impact of government intervention, property rights of enterprises on company performance and the recovery time from financial distress, through the normative research and empirical research method. This study has important theoretical significance to sort out the relationship between the government and the market, improve the internal corporate governance. Plus, this can give instructions that how the financial distress companies adjust strategies timely to recover from the dilemma as soon as possible.Considering the theme of study, this paper is divided into six parts:Chapter I is introduction, which introduces the background and research value of the paper, raise research ideas and methods, and outlines the technology roadmap in this part. Chapter II is literature review, which includes effect of government intervention, properties on firm performance and influncing factors of firm performance during the period of financial distress. Chapter III is the theoretical basis and assumptions, which defines the primary concept of this paper and analyses the effect of the government intervention, properties on corporate performance and recovery time from the condition of distress for companies. Then, hypothesis are put forward on the basis of this. Chapter IV is empirical study design. Empirical models and the variables used in them are elaborated in this part according to the research content of article. Chapter V is the empirical results and analysis, which includes descriptive statistical analysis and regression analysis. Plus, this paper conducted a series of robustness tests in order to verify the robustness of the results. Chapter VI is the conclusion and prospect. In this part, conclusions are made according to the results of regressions and relative policy advices are put forward on the basis of research conclusions. Besides, the innovation points and shortcoming of the study are also pointed at last.This paper finds that the degree of government intervention has positive influence on corporate performance when companies are in financial distress. In addition, because the improvement of company performance owing to soft budget from the external surroundings is offset by serious agent problem for state-owned enterprises, state-owned properties have a negative impact on the performance of the company during distress. As for the recovery time from distress, the private enterprise managers can response rapidly and adjust decisions of operation timely, compared with managers in the state-owned enterprises. So that private enterprises can recovery from the financial distress faster. Besides, the larger scale of the company, the higher operating capacity, the longer listing time, the shorter time that a company need to recovery from financial distress. What’s more, the conclusions of the study are important to ease the "enterprise dilemma tide" resulted from the capital strain and decreased profits after the financial crisis.