Transaction-based government-business relationship via government customer

Peixin Song, Fei Teng, Yu Xin and Liping Xu

International Review of Financial Analysis, 2025, vol. 97, issue C

Abstract: Transaction-based government-business relationship (GBR) can be established when the government serves as a company's customer. This study investigates the consequences and mechanisms of this type of GBR. We find that companies with government customers receive more subsidies, due to both signalling effect and rent-seeking effect. As China's anti-corruption campaign tries to disconnect relation-based GBR and eliminate rent-seeking, transaction-based GBR survives. In the post anti-corruption campaign period, the rent-seeking effect of the transaction-based GBR weakens, but the signalling effect remains, and the government subsidy efficiency improves. This study sheds lights on the economics of transaction-based GBR which is largely ignored in the existing literature and reveals the effects of the interactions of anti-corruption and business transactions.

Keywords: Government-business relationship; Government customers; Government subsidies; Anti-corruption campaign (search for similar items in EconPapers)
JEL-codes: D72 G38 H57 L14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007270

DOI: 10.1016/j.irfa.2024.103795

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