The Influence Of Government Subsidy On Investment Efficiency Of Private Listed Company

Corporate investment efficiency is directly related with the increase of theenterprise value. In the period of China’s economic transformation, listed Companieswidespread underinvestment and overinvestment phenomenon of inefficient investment,and domestic scholars have conducted extensive research about the inefficientinvestment. However, previous studies ignored the relationship between governmentsubsidies and corporate investment efficiency in our special institutional background.Meanwhile, along with private enterprises play an increasingly important role in thenational economy, it has important theoretical and practical significance to study therelationship between government subsidies and investment efficiency of privateenterprises. Could government subsidy improve the investment efficiency of privatecompanies and achieve the effective allocation of resources? In different product marketcompetition and the institutional environment, how government subsidies impact oninvestment efficiency of private enterprise?In view of this, this paper uses the data of private enterprises in Shanghai andShenzhen stock exchange from in2007-2011, trying to examine the how governmentsubsidies influence on under-investment and over-investment from the perspective ofproduct market competition and the institutional environment. The results found that,firstly, as a tool of government intervention, government subsidies played both“helping-hand” and “grabbing-hand”. On the one hand, government subsidies alleviateunder-investment, improve the efficiency of investment; on the other hand it alsoaggravate over-investment, reduce the allocation efficiency of resources. Secondly, inthe industry of high degree of product market competition, government subsidiesimprove the efficiency of investment by alleviate under-investment, however, in theindustry of low degree of product market competition, government subsidies reduce theefficiency of investment by aggravate over-investment. Finally, we found that forprivate enterprise lactated at region of high marketization, government subsidiesalleviate under-investment, but for private enterprise lactated at region of lowmarketization, government subsidies aggravate over-investment.This paper provides a new perspective and ideas of the relationship betweengovernment subsidies and investment inefficiency, and also provides a theoretical basisof establish a good relationship between government and enterprises and the mechanismof government subsidies allocated. In order to achieve the efficiency of government assistance, on one hand, theenterprises should strength corporate governance, perfect the information disclosuresystem, and develop investment strategy match with product market competition andinstitutional environment. On the other hand, the government should deepen reform ofthe enterprise and government, establish an effective competition order, and create agood institutional environment. And finally achieve efficient allocation of scarceresources, and promote the development of the national economy.