Abstract:
Current literature treats all the firms as a whole and identifies the extent of government intervention over firms through comparing the firms’ cross-sectional differences of government intervention proxies. However, the ultimate controller (e.g. local government) usually controls multiple firms in China. Under this circumstances, we should treat the firms controlled by the same ultimate controller as a portfolio and measure the extent of government intervention through comparing the firms’ differences within the portfolio. Hence, we select the ultimate controllers’ voting rights to their controlled firms and firm size as the weight indexes, and construct an index on the importance of firms in their ultimate controller’s portfolio. The larger the index of a firm in the portfolio, the more resources the ultimate controller can obtain from the firm. Then, the firm will be more likely intervened by the government. Using the local state-owned enterprises as a sample, subsequent empirical tests demonstrate that our measure of government intervention is full of explanatory power. We find that the firm has more tax burden, more excess employment, more over-investment, and less market value when the firm is more important in its ultimate controller’s portfolio. In addition, a firm can receive more government subsidy when the firm has a higher importance in its ultimate controller’s portfolio. We also find that the government intervention proxy we construct is more informative than other relevant proxies.
刘行. 政府干预的新度量——基于最终控制人投资组合的视角[J]. 金融研究, 2016, 435(9): 145-160.
LIU Hang. A New Measure of Government Intervention: Perspective from the Ultimate Controller’s Portfolio. Journal of Financial Research, 2016, 435(9): 145-160.
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