Taking Chinese A-Share listed companies from 2007 to 2012 as a sample, this paper makes a research on the effect of government subsidies on firm investment. The result shows that more government subsidies will lead to high firm investment expenditure. Government subsidies have more effective effect on non-state-owned company investment than that of state owned company. Differences in corporate property rights will affect the incentive effect of government subsidized investment. The government subsidies are more subject to the influence of firm investment expenditure in low marketization and slow economic growth areas. The study also shows that the non-efficiency investment of listed companies is more prominent and the government subsidies exacerbate the overinvestment of listed companies. Therefore, the government should establish and implement the corresponding subsidy policy according to the differences of micro enterprises, in order to achieve the desired effect of policy.