Research On The Effect Of Government Subsidies On The Capital Allocation Efficiency Of China’s Real Economy

The real economy is the solid foundation of China’s economic and social development and the foundation of a country’s economy.However,with the rapid development of China’s economy for many years,the real economy has shown a weak trend,and the problem of shifting from real to virtual is ultimately caused by the low efficiency of capital allocation in China’s real economy.As one of the ways that the government intervenes the economy through the redistribution of resources,government subsidy plays an irreplaceable role in making up the market defect,optimizing the allocation of resources,stimulating economic development and promoting the optimization of industrial structure.Since the outbreak of the global financial crisis in 2008,the state has actively applied the government subsidy policy to promote the production and operation of enterprises and increase the effective investment of the society.The government subsidy can not only bring direct cash benefits to enterprises,but more importantly,it can also form the certification effect and play the role of signal transmission.This paper will combine principal-agent conflict,property rights and political relations and other factors to investigate whether government subsidies are really conducive to the improvement of capital allocation efficiency of China’s real economy.This paper takes the listed companies in the a-share market of Shanghai and shenzhen from 2007 to 2018 as research samples.Firstly,it investigates the actual situation of government subsidies and capital allocation efficiency in China’s real economy,and secondly it proposes research hypotheses based on the specific institutional background and relevant literature in China.Then,on the basis of Jeffrey Wurgler’s(2000)model of investment elasticity coefficient,the government subsidy variable is introduced to investigate the relationship between government subsidy and capital allocation efficiency of the real economy.The empirical results show that the government subsidy policy reduces the capital allocation efficiency of the real economy,and analyzes its mechanism from the perspective of the government subsidy aggravating the principal-agent problem and failing to alleviate the financing constraint.In order to make the study more suitable for China’s national conditions,this paper will further consider the differences in China’s institutional background and analyze the differences in the impact of government subsidies on the capital allocation efficiency of China’s real economy from the perspectives of the nature of propertyrights and political connections.The empirical results show that the state-owned property rights,political connections will significantly increase government subsidies to the real economy hinder the role of capital allocation efficiency.Finally,based on the research results,this paper puts forward several thoughts and Suggestions.First,standardize the government functions and establish and improve the government subsidy mechanism.Second,improve the system of monitoring and evaluating the efficiency of government subsidies;Third,we should give play to the efficiency of the market in allocating economic resources and accelerate the development of a multi-level capital market.Fourth,we need to create a fair and effective market environment and strengthen oversight over corporate information disclosure.