The purpose of this paper is to estimate the relationship between private university reform type 1, educational investment, and the rate of seating capacity, through a panel data analysis to verify the adequacy of competitive funding allocation policies for the needs of private universities. Results reveal the relationships between private universities’ grant, educational investment, and the rate of seating capacity that cannot be explained in macro-level analyses. Therefore, it appears that evaluating universities with different conditions on the same basis involves difficulties from the outset. The implications of this analysis are threefold. First, if it is the case that even designated type 1 universities do not receive an increase in educational investment, it is doubtful whether they will be able to successfully implement the desired reforms. Second, it is unclear whether educational investment will lead to type 1 selection. Thus, greater clarity in reform initiatives would be desirable to better support universities that are actively investing in education. Third, capacity fulfillment is not a sufficient or necessary condition for educational investment. For this reason, doubts arise around the premise that a focus on education and capacity qualification share a simple covariant relationship. Future research should seek to refine the model by including the whole subsidy subjects or setting lag variables.