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Official Turnover, Political Connections and Enterprise Subsidies: Evidence from China

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  • Li Ji
  • Wei Zhang

Abstract

This paper investigates the role of political connections in Chinese industrial enterprises receiving government fiscal subsidies. Using data on local officials and enterprises in China, we empirically examine how changes in political connections – due to turnover of key local government officials – impact enterprise subsidies. We find that enterprise subsidies decrease significantly in the year when local officials’ turnover. However, subsidies change less significantly when the local party secretary is promoted locally or has greater incentives for promotion. The impact of changing political connections is greater for non-state-owned enterprises and large-scale enterprises. Our research helps understand the dynamics between local governments and markets in China. It also has important implications for regulating how subsidies are distributed.

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  • Li Ji & Wei Zhang, 2024. "Official Turnover, Political Connections and Enterprise Subsidies: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(2), pages 282-291, January.
    • Handle: RePEc:mes:emfitr:v:60:y:2024:i:2:p:282-291
    DOI: 10.1080/1540496X.2023.2218962
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    Cited by:

    1. Fan, Xueyuan & Zhao, Shukuan & Shao, Dong & Wang, Shuang & Zhang, Bochen, 2024. "Talking and walking: Corporate digital transformation and government subsidies," Finance Research Letters, Elsevier, vol. 64(C).

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