Abstract:
Industrial policy has been widely used in most countries, but its effect on the performance of enterprises has not yet formed a consistent conclusion. From the perspective of government’s “resource-control needs” motivation, this paper analyzes the effect of industrial policy on nationalization of private enterprises. With a large sample of firm-level data from 1998-2007, we find that those enterprises who are encouraged by industrial policies has significantly greater possibility to be nationalized. Further tests find those enterprises that have experienced nationalization won more government subsidies and paid less tax significantly after nationalization, and also employ more staff, confirmed more overheads and paid higher level of wages significantly. We still find that nationalization has significantly negative impact on the firm performance. These findings also provide some empirical evidence for the government’s “resource-control needs” motivation to promote the nationalization of private enterprises from the perspective of nationalization’s economicconsequences.
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