(China Cooperative Research Institute, Anhui University of Finance and Economics)

Abstract: This article explores the phenomenon of shell societies caused by government subsidies from the perspectives of information asymmetry and rent-seeking motives. This article conducts empirical analysis on this issue using CCAD data and fixed observation point data. Firstly, this article utilizes data from all farmer professional cooperatives at the national level to dynamically identify shell cooperatives in the market. Secondly, this article proves from the perspectives of market decision-making and performance that the phenomenon of bad money driving out good money is caused by rent-seeking motives. Specifically, this article found that for every one standard deviation increase in financial subsidies, it leads to an increase of 0.71 shell cooperatives in each village, an increase of about 2% in the proportion of shell cooperatives, while the economic performance of real cooperatives decreases by 2-4%. The above results are driven by the strategic behavior of cooperatives and farmers under information asymmetry. This article further explores this decision-making process from the perspectives of rent-seeking ability and government regulation. The results indicate that an increase in government regulation can help curb the phenomenon of bad money driving out good money.

Keywords: cooperative subsidies; Shell company; Poor money drives out good money; Government regulation