The Role of Government in Firm Outcomes

Ran Duchin, Zhenyu Gao, Haibing Shu and David Denis

The Review of Financial Studies, 2020, vol. 33, issue 12, 5555-5593

Abstract: Using a unique setting in China, where the geographic distance between collective firms and local governments is highly persistent because of legal restrictions on land ownership and mobility, we investigate the role of government involvement in small firms. In our analysis of survey responses, we find that weaker government involvement, measured by greater distance from government, is associated with higher firm autonomy and reduced taxes, protectionism, and anticompetitive behavior. In our analysis of firm-level financial data, we find that distant firms have better operating performance, higher growth, and higher entry rates. We find similar results around exogenous government office relocations.

JEL-codes: D72 G38 P26 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (13)

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