Abstract:
Local SOEs serve as an important pillar for safeguarding people's livelihoods and promoting regional economic development, yet they still face problems such as weak core-business competitiveness and relatively fragmented operations. How central SOEs' equity participation can play a strategic leading role in driving local SOEs to focus on their core business and accelerate high-quality development is a question that merits in-depth investigation. Using local state-owned listed companies on the Shanghai and Shenzhen A-share markets as a sample, this paper investigates the issue from the perspective of equity integration and finds that "central-local cooperation" can drive local SOEs to focus on their core business. The underlying mechanisms are as follows: (1) reducing local SOEs' inefficient non-core businesses by alleviating burdens and optimizing governance. As central SOEs serve national strategies, they can help local SOEs filter out non-core investments that lack competitive potential; meanwhile, by deeply participating in corporate governance through dispatching directors and exercising voting rights, they constrain management's diversification investment behavior. (2) Enhancing financing access. Central SOEs can inject long-term capital into local SOEs and help them obtain market-based financing at lower costs, reducing local SOEs' reliance on direct government subsidies and policy-based loans. Further analysis reveals that the effect of "central-local cooperation" in driving local SOEs to focus on their core business is more pronounced for local SOEs classified as serving specific functions, firms in which non-controlling shareholders have greater say, and those located in regions under greater fiscal pressure. By driving local SOEs to focus on their core business, "central-local cooperation" enhances the market competitiveness and total factor productivity of local SOEs. This paper not only enriches the theoretical research on the governance effects of "central-local cooperation" but also provides empirical evidence for promoting the coordinated development of central and local state-owned capital.
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