The 28th “Theory and Policy” at RUC NADS

Financial Market Reaction and Policy Implementation Expectation

Speaker： LIANG Pinghan, School of Government, Sun Tat-sen University (STSU)

Moderator：LIU Ruiming, National Academy of Development Strategy

Time：March 29, 2019 (Friday) 10:00-11:30

Venue：Meeting Room 815, Chongde Building West Wing (Keyan Building Block A）

Abstract: Convincing implementation is the prerequisite of an effective policy. This article looks into the credibility of policy implementation from a public expectation perspective. Based on the natural experiment on a policy of canceling China’s local tax preference (hereinafter referred to as the policy) and by examining the credibility of local governments through reaction of financial market, this article indicates that: (1) The public in general expect that the policy can be effectively implemented, based on significant negative market reaction of tax-preferential companies after the policy was announced, and symmetrical positive reaction after the cancellation.  (2) From a regional perspective, the market predicts that the policy will be primarily implemented in regions with local governments carrying less social burden; from the perspective of execution target, the market predicts that companies with less policy burden will be targets of execution. Local government will implement the policy primarily in some companies with less policy burden; however, these predictions are not applicable for private companies which share loose interest relationships with local governments. This shows  a public view that local governments are opt to balance interests between pressure from central government and their own interest that there is a trade-off between accountability and self-interests for local governments (3) Based  on  actual results, public expectations agree with actual implementation of local governments. This conclusion enriches researches on policy implementation from a public expectation perspective, and means that central government should put more attention on adjustment of partial interests in the process of monitoring policy implementation, coupled with active publicity for adjusting public anticipation.

Speaker Profile:

LIANG Pinghan, professor of School of Government and researcher of the Center for Public Administration Research of STSU. His fields of research include public administration and political economy, game theory, behavioral and experimental economics and innovation policy. His papers are published in Games and Economic Behavior, Journal of Comparative Economics, Economic Studies, Management World, International Economic Journal, and other leading journals. He is awarded by the Fok Ying Tung Education Foundation as an outstanding young teacher, as well as guides research topic of the National Natural Science Foundation of China and other major national subprojects of social science.