Local Government Competition And The Transfer Of Local State-owned Enterprises Control To Central State-owned Enterprises

The State-owned Enterprises have played an important role in the economic development of our country, and the state-owned enterprises reform also has been an important part of the economic reform. In recent years, however, the privatization process of state-owned enterprises slowed down, and the phenomenon that local state-owned enterprises control transferred to central state-owned enterprises was becoming more common. The transfer of local state-owned enterprises control is the manifestation of the economic reform, and also affected by our economic system. Although the SOE reform has been noticed and deeply studied by the academia, the studies mostly focus on the transfer of local state-owned enterprises to private enterprises and personals, which is the so-called privatization of state-owned enterprises and ignore the transfer to central state-owned enterprises.This paper linked the transfer of local state-owned enterprises control to central state-owned enterprises with the Fiscal Decentralization System of China, and studied the phenomenon from the perspective of local government competition. We treated the local government as a rational economic man who cared about the political achievements and the welfare, and built a two-stage dynamic game model with two players:the local government and the central state-owned enterprise. Then we studied the utilities of the local government in conditions of transfer the local state-owned enterprises control and not transfer. Also, we analyzed how the change of central state-owned enterprises’ willingness to expand and local government competition degree affected the motivation of the local government transferred local state-owned enterprises control. After the game analysis, this paper made an empirical analysis of the influence of local government competition on control transfer with the logit model and the data of A-shares listed state-owned companies.This paper found that local government competition deeply affects the local state-owned enterprises control transfer. We also found that the expansion willingness of central state-owned enterprises is the prerequisite that local state-owned enterprises control transferred to central state-owned enterprises. Besides, financial self-sufficiency rate can also affect the transfer of the control. In the end, we also put some policy recommendations according to the research findings.