Abstract:     Deepening the reform of state-owned enterprises(SOEs) and improving the competitiveness of SOEs is an important part of China's current economic system reform. We uses the double difference method to analyze the difference between the "prudential" and "flexible" supervision of state-owned equity on the innovation of SOEs. We found that after the reform of state-owned equity regulation, more "flexible" regulation has a more positive incentive effect on innovation. And it is more significant for central, technology leading and non "regulatory" industries SOEs. The mechanism test found that more "flexible" supervision has played an innovative incentive effect by improving the equity structure, improving board governance, reducing agency costs, and improving financial redundancy. In addition, the more "flexible" regulation has also significantly promoted the reform of mixed ownership, improved breakthrough innovation and innovation quality of SOEs, and ultimately improved enterprise value, profitability and resource allocation efficiency. We provide micro evidence for the institutional dividend of the reform direction of administration reform of state-owned equity supervision, and also provides important policy enlightenment for deepening the reform of SOEs and promoting the high-quality development of the real economy.

Key words: supervision and reform of state-owned equity, innovation of state-owned enterprises, corporate governance