What Determines the Subsidy Decision Bias of Local Governments? An Enterprise Heterogeneity Perspective

ABSTRACT

This paper evaluates whether enterprise heterogeneity affects the subsidy behavior of local governments for Chinese listed companies over the period 2007–2017. After using the logit and the Tobit regression analyses, the result reveals that enterprise heterogeneity significantly influences the fiscal subsidy selection strategy and policy bias. Local governments are more likely to subsidize high-tech enterprises, state-owned enterprises, and exporting enterprises. The profitability of an enterprise is negatively related subsidies, which confirms the helping-hand role played by local governments. The robustness of our findings is explored in a variety of extensions including quantile regression and investigation of regional heterogeneities.

KEY WORDS:

• enterprise heterogeneity
• fiscal decentralization
• government subsidy

Acknowledgments

We would like to thank the Editor, Professor Ali Kutan and the anonymous referees for their highly constructive comments.

Supplementary Material

Supplemental data for this article can be accessed here.

Additional information

Funding

This work was supported by the Youth Project of in Humanities and Social Science of Ministry of Education of under Grant [19YJC790099]; the Key Project of Department of Education of Q2 Guangdong under Grant [2017WTSCX128]; and the Program for Promoting Academic Excellence of Beijing Normal University Zhuhai under Grant [GL20080001].