Legal Environment,Contract Intensity And Firm Efficiency

The contractual environment(legal environment)is closely related to the input of asset-specific intermediates(contract element intensity).The production of products involves a large number of intermediate inputs,and the types and quantities of specialized intermediates involved in the production of final products in different industries are different.The specific input of the intermediate will increase the risk of the smooth execution of the contract.The intensity of the use of the intermediate determines the dependence of the product on the contract execution system.Influenced by the 2008 international financial crisis,China's economic growth slowed down after the global financial crisis.In the context of institutional reform,industries with high institutional dependence have significant comparative advantages.Legal environment is one of the important institutional factors that determine the industry productivity.The contract intensity of the industry and the institutional environment of the region together determine the degree of incomplete contracts.Although our country implements the law that the country promulgate uniformly and each area is in law making and promulgation respect is consistent.However,due to the differences in culture,economic development level,local judicial personnel's governing ability and other aspects,the development degree and legal environment of intermediary organizations in different regions are quite different,which eventually leads to significant differences in contractual protection among provinces and cities.Different industries have different contract intensity because of the different production environment and the different degree of investment asset specificity.The improvement of contract execution efficiency will have a stronger promotion effect on the productivity of enterprises with high contract intensity.Contract-intensive enterprises are more dependent on the improvement of institutions,especially the improvement of legal environment.The improvement of legal environment will encourage these enterprises to increase their Total Factor Productivity(TFP).Under the new normal,China's economy is facing structural reform and transformation of comparative advantages.In this process,industries with high institutional dependence undoubtedly have comparative advantages and development potential,which will be the growth point of China's economy in the future.Therefore,the government should take advantage of the situation and create a good legal and policy environment for them.This paper selects micro data of listed companies in China's manufacturing industry from2009 to 2017 to establish non-equilibrium panel data.In this paper,OP method,LP method and Solo residual method(OLS method)are used to calculate the total factor productivity of enterprises.Contract intensity is measured based on the asset specificity of intermediate inputs.The proportion of legal practitioners was used as the proxy variable of legal environment,and the total factor productivity was used as the enterprise efficiency.This paper studies the influence of legal environment on total factor productivity of enterprises with different industry contract intensity.According to the different ownership of enterprises,enterprises are divided into state-owned enterprises,private enterprises and foreign-funded enterprises to further verify the impact of legal environment and contract intensity on total factor productivity of enterprises under state-owned enterprises or non-state-owned enterprises.The research results show that :(1)The improvement of legal environment can promote the improvement of enterprises' total factor productivity,indicating that the improvement of contract execution efficiency can help to improve enterprises' total factor productivity;(2)For enterprises with high contract intensity,the improvement of legal environment has a more significant promoting effect on total factor productivity;(3)The regression results of ownership subsamples show that,for industries with high contract intensity,the improvement of legal environment has a more obvious effect on the total factor productivity of state-owned manufacturing listed companies than that of non-state-owned manufacturing listed companies(private manufacturing listed companies and foreign-funded manufacturing listed companies).It indicates that when the local legal environment is improved,the state-owned manufacturing companies with high contract intensity are more likely to obtain higher productivity.Robustness tests were conducted on state-owned enterprises and non-state-owned enterprises.By comparing significance and coefficient,it was found that:The improvement of legal environment can significantly promote the improvement of total factor productivity of state-owned enterprises and private enterprises.And with the increase of contract dependence,the improvement of legal environment has a greater effect on the productivity of state-owned enterprises than private enterprises.Finally,based on the differences of legal environment,industry contract intensity and enterprise ownership,some suggestions are put forward to improve the total factor productivity of enterprises.