China's 'Mercantilist' Government Subsidies, the Cost of Debt and Firm Performance

By Chu-Yeong Lim, Jiwei Wang, Cheng (Colin) Zeng. 2018

200 citations recorded by the source corpus.

China has been adopting a “mercantilist” policy by lavishing massive government subsidies on Chinese firms. Using hand-collected subsidy data on Chinese listed companies, we find that firms receiving more subsidies tend to have a lower cost of debt. However, such firms fail to have superior financial performance. Instead, firms with more subsidies tend to be overstaffed, which demonstrates higher social performance. These results are mainly driven by non-tax-based subsidies rather than tax-based subsidies. Overall, our results suggest that the Chinese government uses non-tax-based subsidies to achieve its social policy objectives at the expense of firms’ profitability.

Subfields: Accounting, Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/bb5d5861e68d7b33506e410fe06a79748835cd6b

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Xiang Deng
2. Xiang Cheng

In Economics and Econometrics

1. Xiang Deng
2. Xiang Cheng
3. Lei Ruan
4. Heng Liu

In Strategy and Management

1. Xiang Deng
2. Xiang Cheng
3. Lei Ruan
4. Heng Liu

Citations in the corpus

• Can ESG Indices Improve the Enterprises’ Stock Market Performance?—An Empirical Study from China (2019, methodology): “In order to overcome the problem of missing variables as much as possible, this paper selects the following controlled variables based on the previous research: total return on assets (ROA) [42], number of independent directors (LL) [47], shareholding ratio of the largest shareholder (FH) [38,39], c”