Rent-Seeking and Firm Performance: From the Perspective of the Eight- Point Regulation and Government Subsidies

Cao Wei(曹伟),ZhaoCan(赵璨)and Yang Deming(杨德明)
‘Business School, Nanjing University, Nanjing, China
School of Management, Ocean University of China, Qingdao, China
School of Management, Jinan University, Guangzhou, China

Abstract: With the implementation of the CPC s eight-point regulation as a natural experiment platform, this paper seeks to unravel the causality between rent-seeking and firm
peiformance for SOEs and private firms respectively. Our empirical research has found that after the release of the “eight-point regulation”, investors responded negatively to private
firms and positively to SOEs. Such market response is more significant for firms with a high degree of rent-seeking. Further research has found that rent-seeking helps both SOEs and private firms receive more subsidies from the government. While government subsidy from
rent-seeking is conducive to the peiformance of private firms, it is not the case for SOEs. This implies that rent-seeking activities serve as a “lubricant” for private firms but have a
“stumbling block” effect for SOEs.

Keywords: rent-seeking, corporate profitability, eight-point regulation, government subsidy
JEL Classification: M48, K20

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