How to Achieve Government-business Collaboration in Information Technology Industry Policy? From the Perspective on Cost of Equity Capital

Abstract

This paper examines the impact and the mechanism of the information technology industry policy on the cost of equity capital from the perspective of the government-business collaboration based on the externality theory and soft budget constraint theory. This research selected the Chinese A-share non-financial listed companies from 2012 to 2019 as examples and empirically tests the cost of equity capital effect of the implementation of "Broadband China" policy based on the difference-in-difference (DID) model. The main test shows that the "Broadband China" policy has significantly reduced the cost of equity capital. The mechanism test reveals the function of "Broadband China" policy in optimizing the return, the configuration and the distribution of factors, and reflecting the government-business collaboration effect. Furthermore, the regional economic development, the industry competitiveness and the supply chain conflicts are proved to strengthen the above mechanisms respectively. The heterogeneity analysis shows that the effect of the "Broadband China" policy on the cost of equity capital is realized through the equity investment, positively affected by government-business relationship, and shows spatial aggregation effect. Actually, the digital transformation of the economy, led by the new generation of information technology, now provides the government and companies with opportunities for coordinated development. Therefore, for government, we recommend it to improve the support systems related to the information technology industry and give additional impetus to the development of the digital economy by using the benevolent regulatory measures. For companies, we also expect them to take advantage of the digital economy to achieve sustainable development. JEL Classification: G12；G32；G38