The Impacts Of Rent-seeking On Firm Value And The Relevant Mechanisms

Forty years of reforming and opening-up have witnessed great achievement in Chinese economy and society.However,we cannot ignore some crucial problems in the construction of legislation and marketization.For example,the boundary between government and market is not clear and the government still play an irreplaceable role in the allocation of resources.Some officials even abuse power to set rent.Under these specific circumstances,in order to reduce unfair treatment imposed by the officials and obtain crucial resources conveniently,corporations have a tendency to bribe the officials and seek rents.What impacts will rent-seeking make on firm value?What routes does it take to influence firm value?Are the impacts different under different external environment or internal governance?Are the long-term effects of rent-seeking on firm value the same as short-term effects?This paper is based on the issues listed above.This paper took 2009-2015 listed enterprises as samples,and used multiple linear regression equation to study the impacts of rent-seeking on firm value and the mechanism of it.The results found that,rent-seeking can improve firm value.On the one hand,rent-seeking can be taken as substitute institution to protect intellectual property rights of the enterprises better,which may stimulate corporations to increase R&D input.The enterprises spending more on rent-seeking tend to gain more fiscal subsidy.In addition,rent-seeking can ease the financing constraints through helping the corporations get more bank loans and into the financial markets which need government approvals.On the other hand,rent-seeking may squeeze out strategic investment of the enterprises and lead to underinvestment.Enterprises are expected to bear more social burden if they have a close relationship with the government through rent-seeking.Then this paper study further about the different impacts of rent-seeking on the firm value and the mechanisms of it under different external environmental and internal governance as well as the duration of the impacts of rent-seeking.The empirical results show that rent-seeking has a significantly positive effect on firm value in private enterprise samples,but that the effect is not significant in state-own enterprise samples.The long-term effect of rent-seeking on firm value is significantly positive.Finally,based on the theoretical analysis and empirical study results,this paper imposed some policy suggestions from the government's point of view such as improving intellectual property rights protection,standardizing fiscal subsidy system,strengthening supervision of the government so as to building better business environment.In the meantime,this paper suggested that corporations should not rely on the temporary benefits brought by rent-seeking and that they should enhance their competitive power fundamentally so as to realizing sustainable development.