Disincentive or Incentive? What Role Do Government Subsidies Play for High-Tech Companies in the New “Double-Cycle” Development Model?- The Moderating Role of the Internal Corporate Governance Mechanism

During the “14th Five-Year Plan” period, some high-tech enterprises are facing many difficulties in foreign trades. How to break through the difficulties and find the right time to promote the positive development of high-tech technologies is the focus of building a “double-cycle” pattern, which is also a key point of the great concern for the Government. Although government subsidies are one of the important policies of the state to guide the innovative development of high-tech enterprises, there are different views on their influence on the financial performance of enterprises. In this paper, a panel of high-tech companies listed on A-shares from 2016 to 2020 is selected for empirical analyses using a fixed-effects model to explore the relationship among government subsidies, internal corporate governance mechanisms and corporate performance under the new “double-cycle” development pattern. The results show that government subsidies have a significant positive impact on the financial performance of high-tech enterprises. Using internal corporate governance mechanisms as the moderating variables, it was found through further tests that the relationship between the two was significantly negatively moderated through shareholding concentration while was significantly positively moderated through shareholding checks and balances. The relationship was significantly and positively moderated based on board size and executive compensation incentives. The findings of the study can provide recommendations in terms of both policy formulation, the improvement of internal governance mechanisms of enterprises and the rational use of government subsidies.