Abstract: The impact of local government performance competition on firm capacity utilization has gradually attracted the attention of researchers． However，the existing literature has not solved the causal recognition problem． Based on this，this paper uses the direct loss of natural disasters in each province as an instrumental variable，and uses the policy of“streamline administration and delegate powers”as a“natural experiment”to examine the causal effects of local government performance competition on firm capacity utilization． The empirical results show that the performance competition of local governments reduces the capacity utilization rate; further research finds that the negative impact of local government performance competition on the capacity utilization rate is more obvious in state-owned firms and firms in lower marketization areas． Finally，it is found that short-term investment expansion is the main channel for performance competition to affect the capacity utilization rate． These empirical facts show that the performance competition system that originated in the 1980s has alrady caused serious overcapacity，which is not conducive to the improvement of the quality of economic growth． The research helps to understand the formation mechanism of overcapacity in enterprises and has important implications for formulating effective“de-capacity”policies．
Key words: local government performance competition; capacity utilization; property rights; degree of marketization; short-term investment expansion