How does central enterprise reform promote total factor productivity of defense firms in China?

Since 2017, the reform of central state-owned enterprises (SOEs) in China has had a profound impact on the operations and development of military-industrial enterprises. To study the influence of SOE reform on the total factor productivity (TFP) of China's state-owned military-industrial listed enterprises, this study uses a difference-in-differences model to conduct empirical tests. Its sample consists of relevant data from 115 military-industrial listed enterprises from 2011 to 2021. The results show that SOE reform has effectively improved the TFP of state-owned military-industrial listed enterprises. Furthermore, through heterogeneity testing, it was found that government subsidies weakened the impact of SOE reform on the TFP of military-industrial enterprises. Stock incentives had a greater impact on TFP than mergers and acquisitions. In similar conditions, motivating employees was more conducive to improving operational efficiency. The mechanism by which SOE reform affects the TFP of military-industrial enterprises is reflected in decreased agency costs and improving governance efficiency. The empirical results confirm the positive role of SOE reform and have certain enlightening significance for how to implement a scientific and reasonable subsidy system as well as how to design more effective reform measures.