Government subsidies and corporate investment efficiency: Evidence from China

Jinshuai Hu, Haiyan Jiang, Mark Holmes*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

56 Citations (Scopus)


This study examines how state subsidies to firms affect corporate investment efficiency. Using archival data from a sample of Chinese listed firms over the 2007–2015 period, we find that government subsidies have a negative effect on firms' investment efficiency, and this negative effect is more pronounced for firms that are less financially constrained. Further analyses suggest that government subsidies are positively associated with firms' over-investment, although they alleviate under-investment. Our findings are robust to a series of tests to alleviate concerns about potential endogeneity and self-selection bias.

Original languageEnglish
Article number100658
Pages (from-to)1-12
Number of pages12
JournalEmerging Markets Review
Publication statusPublished - Dec 2019


  • China
  • Government subsidy
  • Investment efficiency
  • Political intervention


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