Research On Local Government Intervention And Over-investment Behavior Of State-owned Enterprises

State-owned enterprises play a leading role in China’s economy,their investment efficiency directly affects the preservation and appreciation of state-owned capital.Existing research shows that China’s state-owned enterprises have excessive investment.Most of the current literature studies corporate over-investment issues from the level of corporate governance,including agency issues,free cash flow hypothesis,executive’s self-confidence,and shareholding structure,etc.In the context of China’s unique institutional background,government intervention will also affect in the investment decision-making of state-owned enterprises,some scholars have incorporated government intervention factors into the study of over-investment,and used it as a supplementary expansion under the issue of corporate governance.In the context of a new round of reform of state-owned enterprises,this paper starts from the motivation of government intervention based on the public governance objectives of local governments(economic growth,employment,finance,and consumption levels of residents),and studies the motivations for local governments to intervene in local state-owned enterprises’ investment decisions,which in turn leads to excessive investmentThis paper uses the data of China’s listed state-owned enterprises from 2013 to 2018 to conduct an empirical study on the relationship between local government intervention and state-owned enterprises’ excessive investment.In the first step,based on previous researches,this paper makes a hypothesis that the degree of government intervention is positively correlated with the over-investment level of state-owned enterprises.Through further theoretical analysis,it proposes four motive hypotheses of local government intervention in local state-owned enterprise investments.In the second step,this paper empirically tests the hypothesis.First,the residual measurement model of Richardson(2006)is used to measure the level of over-investment of state-owned enterprises,and then the state-owned enterprises with over-investment are selected as samples,and then separately establish two models for regression testing.The first model uses the marketization index of Fan Gang(2018),the level of state-owned enterprises and other indicators to measure the degree of government intervention,and examines the impact of government intervention on the level of over-investment of state-owned enterprises;The second model uses regional economic growth,local employment,local fiscal deficits,and local residents’ consumption as the motivations for local government intervention to test whether local governments will interfere with the investment decisions of local state-owned enterprises due to these governance objectives,resulting in excessive investment.In addition,this paper also divides state-owned enterprises into central state-owned enterprises and local state-owned enterprises,and makes regression tests to test the assumptions made in the previous section.Finally,the results are tested for robustness by replacing indicators.This paper finds that there is a significant positive correlation between government intervention and the level of over-investment of state-owned enterprises.Further research based on the motivation of local government intervention found that the regional economic growth rate and the local fiscal deficit have a significant correlation with the over-investment of local state-owned enterprises,while local employment and residents’ consumption levels have no significant impact on the over-investment of local state-owned enterprises.In addition,the sub-sample study found that,compared with local state-owned enterprises,the phenomenon of over-investment caused by local government intervention in central state-owned enterprises based on the four motivations mentioned above is not significant.However,the excessive investment level of local state-owned enterprises is significantly related to the local economic growth rate,employment level and fiscal deficit.The reason may be that the local government has limited control over the central state-owned enterprises and the central state-owned enterprises have a relatively sound audit system,and it is difficult to intervene.Therefore,the local government’s intervention in the investment of state-owned enterprises in order to achieve certain governance objectives is mainly concentrated on local state-owned enterprises.