The Impact Of Government Subsidies On Enterprises’ Business Behavior

With the increasing number of enterprises that gain government subsidies,it becomes especially necessary to study the effect of government subsidies and the optimal strength of government subsidies under the new situation.This paper will use Difference-in-Difference model and Two-way Fixed Effects model to investigate the influence of governmental subsidy behavior and the strength of government subsidies to enterprises’ business behavior,by using the panel data of 2007-2015 Shanghai and Shenzhen main board listed enterprises.Besides,this paper will try to find out the inflection point of subsidy strength,and will further examine the factors that affect the results of government subsidies.This research shows that governmental subsidy behavior will improve the R&D intensity and reduce the relative employment scale of those enterprises that have gained government subsidies.And with the increase of governmental subsidy period,the effects of government subsidies become more significant,while there is no significant impact on enterprise profitability.This paper also finds out that subsidy strength will affect the influence of government subsidies,and there is a u-shaped relationship between the strength of government subsidies and enterprises’ business behavior.Government subsidies will significantly improve the efficiency of enterprises’ innovation and reduce enterprises’ employment scale before the inflection point.Finally,this paper shows that the initial conditions,like the mechanization level,development stage and employment scale of the enterprises,will affect the influences of government subsidy to enterprises’ business behavior,and the influences are different.This paper will provide a comprehensive and objective conclusion to the effects of government subsidies,and will provide some effective and feasible references for governments.