The intervention effect of government subsidy on capital market is a hot topic that scholars urgently need to solve. Based on government subsidies, this paper

investigates the pricing efficiency of private placement and the economic logic behind private placement proceeds from the primary and secondary markets respectively. The stochastic frontier analysis method is used to analyse the Ashare listed companies in Shanghai and Shenzhen from 2007 to 2017 that received government subsidies and implemented private placement. The empirical results show as follows: (1) The issue of directional issuance price premium phenomenon, secondary offerings listed after the premium phenomenon also exists, government subsidies contributed to the extent of the directional issuance price than its intrinsic value, resulting in reduced pricing efficiency, and this phenomenon in stateowned enterprises is more serious. (2) The more serious the pricing bubble is, the higher the revenue is. At the same time the government subsidies for the purchase benefits will have a positive impact, and this phenomenon is more prominent in the stateowned enterprises. Furthermore, the path test results show that the government subsidy is mainly dependent on earnings management, independent innovation and the growth of individual stocks. The results suggest that government subsidies can be dissimilated as hidden tools for manipulating share prices, distorting the incentives for government intervention and making it less effective than it was intended. The research conclusion provides a new perspective for solving the attribution problem of private placement income and a new method for reasonably evaluating the microgovernance effect caused by government subsidy policy.