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Ownership structure, corporate governance and investment efficiency of Chinese listed firms

Author

Listed:
  • Naiwei Chen
  • Hao-Chang Sung
  • Jingjing Yang

Abstract

Purpose - This paper aims to examine whether and how ownership structure and corporate governance have bearings on the investment efficiency of Chinese listed firms. Design/methodology/approach - The authors measure the investment efficiency by following the work of Richardson (2006) and classify listed firms into two categories: state-owned enterprises (SOEs) and private firms. OLS regressions with both industry and year fixed effects are used to investigate the effect of ownership structure and governance mechanisms on the listed firms’ investment efficiency. Findings - The authors find that ownership concentration has a negative impact on investment efficiency, and this effect is more pronounced in SOEs than in private firms. In addition, adoption of incentive-based compensation helps improve investment efficiency. Compared with other types of institutional investors, mutual funds are more likely to exert a positive effect on the investment efficiency of investee companies. Originality/value - This paper examines the monitoring effect of governance mechanisms in China from a new perspective, which is the investment efficiency. Furthermore, previous studies provide minimal evidence indicating any effect of incentive-based compensation on firm performance in China. This study provides empirical evidence on this effect by using incentive-based compensation (whether CEOs have been granted stock options) as an explanatory variable in the regression models.

Suggested Citation

  • Naiwei Chen & Hao-Chang Sung & Jingjing Yang, 2017. "Ownership structure, corporate governance and investment efficiency of Chinese listed firms," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 29(3), pages 266-282, August.
    • Handle: RePEc:eme:parpps:par-12-2015-0046
    DOI: 10.1108/PAR-12-2015-0046
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    Citations

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    Cited by:

    1. Xu, Weidong & Luo, Zijun & Li, Donghui, 2024. "Investor–firm interactions and corporate investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 84(C).
    2. Hangbo Liu & Xuemeng Guo & Dachen Sheng, 2024. "The Impact of Heterogeneous Market Sentiments on Corporate Risk-Taking and Governance," Mathematics, MDPI, vol. 12(22), pages 1-21, November.
    3. Ibrahim M. Menshawy & Rohaida Basiruddin & Nor‐Aiza Mohd‐Zamil & Khaled Hussainey, 2023. "Strive towards investment efficiency among Egyptian companies: Do board characteristics and information asymmetry matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2382-2403, July.

    More about this item

    Keywords

    China; Investment efficiency; Corporate governance; Ownership structure; Institutional investor; Incentive-based compensation; G23; G30; G32;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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