Separating Policy Burdens : Quantifying the Economic Benefits and Mechanisms in China's State-Owned Enterprise

One of the important reforms for state-owned enterprises (SOEs) in China is to remove policy burdens. However, there are few papers that empirically discuss the economic benefits and potential mechanisms of this policy. This paper uses the separation of “Heating, Power, Water, and Estate” (HPWE) in SOEs as a quasi-natural experiment to test the economic benefits and mechanisms of removing policy burdens. From the perspective of firm performance, this research found that by separating HPWE, the performance of SOEs has significantly improved. This result still holds after using a series of robustness tests, such as parallel trend tests, placebo tests, and control group replacement. The mechanism analysis found that separating HPWE can improve firm performance by reducing redundant personnel, increasing labor productivity, and decreasing agency costs. The cross-sectional test found that this effect is stronger when there is high labor intensity and a greater extent of separation of ownership and control. Overall, this paper evaluates the economic effects and mechanisms of separating policy burdens on SOEs