This paper extends the existing studies of cyclical fiscal policy by providing the first systematic theoretical and empirical study of cyclical quasi‐fiscal investment of state‐owned enterprises (SOEs) in China. Using data from Chinese listed companies and the System GMM method, the results show that: (1) both central and local SOEs exhibit expansion‐biased investment behaviours; (2) the expansion‐biased investment of central SOEs mainly goes to the tertiary industry and the western regions of China, while the expansion‐biased investment of local SOEs mainly occurs in the tertiary industry and the middle and western regions of China; (3) during the economic recession, the higher the local growth targets, the more bank credit central and local SOEs can obtain, and the more pronounced the expansion‐biased investment. The study shows that apart from the countercyclical fiscal policy implemented by central and local governments, the quasi‐fiscal function of central and local SOE investments is also key for the Chinese economy to quickly recover from recessions.
This paper exploits a quasi-natural experiment in China, the environmental protection tax reform, to examine the effect of environmental regulation on corporate green investment. Based on Chinese listed company data and the multi-period DID method, we find the enhancement of environmental regulation harms corporate green investment in a short time, and green investments in the treatment group were reduced by 19.57 million (RMB) on average. Further exploring and examining the potential mechanisms of the above effect, we find the above effect is caused by the suppression effect of financing constraints and the crowding-out effect of research and development (R&D) expenditures. We also analyze the heterogeneity of enterprise ownership, enterprise size, and enterprise location, and find that non-state-owned enterprises, small-sized enterprises, and enterprises in the eastern region will experience a greater reduction in green investment when environmental regulation is enhanced. Based on the above findings, we put forward corresponding policy recommendations.
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