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

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  • Wei Peng
  • Chi-Chuan Lee
  • Ke Xiong

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.

Suggested Citation

  • Wei Peng & Chi-Chuan Lee & Ke Xiong, 2021. "What Determines the Subsidy Decision Bias of Local Governments? An Enterprise Heterogeneity Perspective," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(4), pages 1215-1231, March.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:4:p:1215-1231
    DOI: 10.1080/1540496X.2019.1620099
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    Cited by:

    1. Li, Quan & Chen, Yang & Wan, Mengfei, 2023. "The impact of central environmental inspection on institutional ownership: Evidence from Chinese listed firms," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    2. Wu, Yizhong & Lee, Chien-Chiang & Lee, Chi-Chuan & Peng, Diyun, 2022. "Geographic proximity and corporate investment efficiency: Evidence from high-speed rail construction in China," Journal of Banking & Finance, Elsevier, vol. 140(C).

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