Cost of government and firm value
Document Type
Journal article
Source Publication
Journal of Corporate Finance
Publication Date
6-1-2013
Volume
21
First Page
136
Last Page
152
Publisher
Elsevier BV
Keywords
Cost of government; Firm value; Efficiency; Productivity; Grabbing hand; Political economy
Abstract
Do high expenditures incurred in running the government benefit or hurt firms? Using Chinese data between 1999 and 2006, we find that higher administrative expenditures in provincial governments are associated with lower firm value, lower stock and financial performance, and lower labor productivity. Local governments that spend more on public administration tend to collect more fees from companies and spend less on social welfare and infrastructures. Our evidence is consistent with the “grabbing hand” hypothesis and has important policy implications.
DOI
10.1016/j.jcorpfin.2013.01.008
Print ISSN
09291199
E-ISSN
18726313
Funding Information
Firth acknowledges support from a grant from the Research Grants Council of the HKSAR (LU340610). Gong acknowledges support from a grant from the Research Grants Council of the HKSAR (PolyU 5427/09H).
Publisher Statement
Copyright © 2013 Published by Elsevier B.V.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Gong,S. X., & Shan, L. (2013). Cost of government and firm value. Journal of Corporate Finance, 21, 136-152. doi: 10.1016/j.jcorpfin.2013.01.008