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
3
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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