Anti-Corruption Reform and the Role of Fiscal Subsidies in Corporate Innovation

This paper examines the effect of anti-corruption reform on the role of fiscal subsidies in corporate innovations. Using a sample of A-share listed companies in China from 2012 to 2014, we find that the fiscal subsidies have a positive effect on corporate innovations, either in the sense of R&D investments or patents output. The positive effect of fiscal subsidies is more significant when the anti-corruption effort is stronger. Further results reveal that innovation ability of the enterprises with political connections has more significant changes. This paper can help us understand how the political environment changes affect the efficiency of financial subsidies.