Ownership structure and firm performance: Evidence from the Chinese corporate reform

Kang, Youngsam; Kim, Byung–Yeon

doi:10.1016/j.chieco.2012.03.006

Cited by 86 publications

(54 citation statements)

References 21 publications

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“…CC is positively and significantly associated with ROA and ROE , indicating that a more concentrated control structure is beneficial to boosting corporate performance. This result is consistent with that of Shleifer and Vishny (), Megginson et al (), Xu and Wang (), Lemmon and Lins (), Chen et al (), and Kang and Kim (). However, the interaction between the government dummy and CC is significantly and negatively related to ROA and ROE , indicating the worsening effects of government control.…”

Section: Resultssupporting

confidence: 92%

How Does Government Control Affect Firm Value? New Evidence for China

Abolhassani

Zhi

Haan

2019

Kyklos

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Summary The role of government involvement in firms has received a lot of attention in the last few decades. Government involvement could result in a ‘supporting hand’ and a ‘grabbing hand’. This paper investigates how government control influences the financial performance of Chinese listed firms. We use a panel data set of firms publicly traded on the stock exchanges of Shanghai and Shenzhen over the period 2009‐2013. Our dataset includes 5501 firm‐year observations. Our results suggest that government control of firms, measured by the shareholdings that are directly and indirectly controlled by the government, is negatively related with firms’ financial performance. More specifically, the return on assets, the return on equity and the market‐to‐book ratio are, on average, 1.3%, 2.0% and 8.2% lower for government‐controlled firms. Both central and local government control is undermining firm performance. These findings provide support for the ‘grabbing hand’ theory of the government. Our results also suggest that the negative effect of government control becomes stronger when firm profitability is higher. Firms with a poor financial performance benefit from government control, which supports the ‘supporting hand’ theory of the government.

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Section: Resultssupporting

confidence: 92%

How Does Government Control Affect Firm Value? New Evidence for China

Abolhassani

Zhi

Haan

2019

Kyklos

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“…There is also evidence that Dynamic study concentrated shareholders can increase their own benefits at the expense of minority shareholders (Porta et al, 2002;Claessens and Yurtoglu, 2013;Liu et al, 2011;Du et al, 2014). A large body of empirical study has utilized ownership concentration (in the form of either institutional ownership or other block-holder ownership) as a proxy to explore its impact on firm performance (Yu, 2013;Hess et al, 2010;Lin et al, 2009;Gul et al, 2010;Ma et al, 2010;Kang and Kim, 2012;Yixiang, 2011). In this study, by controlling the endogenous nature of the ownership concentration variable, based on agency theory, we propose the following hypothesis:…”

Section: Ownership Concentrationmentioning

confidence: 99%

Dynamic study of corporate governance structure and firm performance in China

Shao

2019

CMS

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Purpose The paper aims to provide a comprehensive investigation of the relationship between corporate governance (CG) structure and firm performance in Chinese listed firms from 2001 to 2015. The authors’ motivation derives from the fact that the CG system in China is different from those in the US, the UK, Germany, Japan and other countries. Design/methodology/approach A large unbalanced sample, covering more than 22,700 observations in Chinese listed firms, was used to explore, by means of a system-generalized method-of-moments (GMM) estimator, the relationship between CG structure and firm performance to remove potential sources of endogeneity. Findings Results show that Chinese CG structure is endogenously determined by the CG mechanisms investigated: there is no relationship between board size (including independent directors) and firm performance; CEO duality has a significantly negative effect on firm performance; concentration of ownership has a significantly positive influence on firm performance; managerial ownership is negatively correlated with firm performance; state ownership has a significantly positive effect on firm performance; and a supervisory board is positively correlated with firm performance. Practical implications The findings provide policymakers and firm managers with useful empirical guidance concerning CG in China. Originality/value Few integrative studies have examined the impact of CG structure on firm performance in China. This study adds new empirical evidence that the relation between CG structure and performance in China is endogenous and dynamic when controlling for unobserved heterogeneity, simultaneity, and dynamic endogeneity.

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“…NOFO data prior to 2004 is not available hence our sample covers financial years 2004-2013 and includes 2,428 A-share listed non-financial firms. We estimate the following DID model (1) including an intercept α, year dummies YEAR t , industry dummies IND i and an error term ε it to test hypotheses H1 and H2 on the effects of the SSSR: (2015), Kang and Kim (2012) and Huang and Wang (2011). POST SSSR it is a dummy variable which equals to 1 for firm-years after their SSSR reforms and 0 if otherwise.…”

Section: Data and Modelsmentioning

confidence: 99%

“…In particular, privatization in China has taken a more gradual approach than in Russia and other former Soviet republics. This gradual approach to privatizing enterprises in China offers time for its institutional and legal frameworks to be built and evolve which overall has prevented failures exemplified in Russia such as a large output drop, asset-stripping of insiders and rent-seeking (Kang and Kim 2012).…”

Section: Introductionmentioning

confidence: 99%

China’s secondary privatization: new evidence on controlling shareholders tunnelling

Huang

2016

Applied Economics

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This article utilizes the 2005 split-share structure reform (SSSR) in China as a natural experiment and conducts difference-in-differences (DID) tests to analyse corporate governance changes among Chinese SOEs compared to POEs. We show that tunnelling significantly reduced in both POEs and SOEs after the SSSR. More importantly, we find a significant and positive 'privatization effect' on SOEs' tunnelling activities during the post-reform period suggesting the reductions of tunnelling were smaller among SOEs than POEs following the SSSR. In contrast, excess returns around the SSSR indicate that investors expected a negative 'privatization effect' on SOEs' tunnelling. These findings suggest that the quality of corporate governance did not improve among SOEs as a result of the secondary privatization as the stock market expected without fundamental changes to firm ownership and control following the SSSR. The benefits of privatization accrue to the government controlling shareholders rather than minority investors.

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Ownership structure and firm performance: Evidence from the Chinese corporate reform

Cited by 86 publications

References 21 publications

How Does Government Control Affect Firm Value? New Evidence for China

How Does Government Control Affect Firm Value? New Evidence for China

Dynamic study of corporate governance structure and firm performance in China

China’s secondary privatization: new evidence on controlling shareholders tunnelling

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