IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v44y2023i2p1107-1124.html
   My bibliography  Save this article

State‐owned equity participation and private sector enterprises' strategic risk taking: Evidence from China

Author

Listed:
  • Xin Li
  • Qiong Xu
  • Fei Guo
  • Hecheng Wang

Abstract

Whether state‐owned equity participation in private enterprises to implement mixed ownership reform can help the sustainable development of private enterprises has been a widespread topic in recent years. Using data from China's A‐share private listed enterprises from 2014 to 2020, this paper adopts the fixed effect model to examine the impact of state‐owned equity participation on the strategic risk taking of private enterprises. The study finds that state‐owned equity participation can improve private enterprises' strategic risk taking, while alleviating financing constraints and improving corporate governance are important mechanisms. Heterogeneity analysis demonstrates that when enterprises belong to high‐tech enterprises and the industry competition is relatively high, state‐owned equity participation has a more remarkable effect in promoting strategic risk taking of private enterprises. Further research also finds that state‐owned equity participation can improve enterprises' innovation capability, which is embodied in the increase of patent output. This research enriches the relevant achievements of the mixed ownership reform of private enterprises and has certain theoretical and practical guidance for private enterprises' strategic choice.

Suggested Citation

  • Xin Li & Qiong Xu & Fei Guo & Hecheng Wang, 2023. "State‐owned equity participation and private sector enterprises' strategic risk taking: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1107-1124, March.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:2:p:1107-1124
    DOI: 10.1002/mde.3735
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3735
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3735?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Boubakri, Narjess & Saffar, Walid, 2019. "State Ownership and Debt Choice: Evidence from Privatization," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(3), pages 1313-1346, June.
    2. Amore, Mario Daniele & Miller, Danny & Le Breton-Miller, Isabelle & Corbetta, Guido, 2017. "For love and money: Marital leadership in family firms," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 461-476.
    3. Ben-Nasr, Hamdi & Cosset, Jean-Claude, 2014. "State Ownership, Political Institutions, and Stock Price Informativeness: Evidence from Privatization," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 179-199.
    4. Rita Gunther McGrath & Atul Nerkar, 2004. "Real options reasoning and a new look at the R&D investment strategies of pharmaceutical firms," Strategic Management Journal, Wiley Blackwell, vol. 25(1), pages 1-21, January.
    5. Wang, Lihong, 2015. "Protection or expropriation: Politically connected independent directors in China," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 92-106.
    6. Zhao, Hongxin & Lu, Jiangyong, 2016. "Contingent value of political capital in bank loan acquisition: Evidence from founder-controlled private enterprises in China," Journal of Business Venturing, Elsevier, vol. 31(2), pages 153-174.
    7. Xu, Qiong & Zhong, Meirui & Li, Xin, 2022. "How does digitalization affect energy? International evidence," Energy Economics, Elsevier, vol. 107(C).
    8. Rodríguez, Alicia & Hernández, Virginia & Nieto, María Jesús, 2022. "International and domestic external knowledge in the innovation performance of firms from transition economies: The role of institutions," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    9. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
    10. Josip Kotlar & Alfredo De Massis & Hanqing Fang & Federico Frattini, 2014. "Strategic reference points in family firms," Small Business Economics, Springer, vol. 43(3), pages 597-619, October.
    11. Zengji Song & Abraham Y. Nahm & Zongyi Zhang, 2017. "Partial State Ownership, Political Connection, and Financing: Evidence from Chinese Publicly Listed Private Sector Enterprises," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(3), pages 611-628, March.
    12. Tang, Hui-Wen & Chen, Anlin, 2020. "How do market power and industry competition influence the effect of corporate governance on earnings management?," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 212-225.
    13. Zengji Song & Abraham Nahm & Zongyi Zhang, 2015. "The value of partial state ownership in publicly listed private sector enterprises: evidence from China," Post-Communist Economies, Taylor & Francis Journals, vol. 27(3), pages 336-353, September.
    14. Su, Zhong-qin & Xiao, Zuoping & Yu, Lin, 2019. "Do political connections enhance or impede corporate innovation?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 94-110.
    15. Kong, Xiangyi & Xu, Jian & Zhang, Yinge, 2022. "Industry competition and firm productivity: Evidence from the antitrust policy in China," Finance Research Letters, Elsevier, vol. 47(PB).
    16. Rashid Mehmood & Ahmed Imran Hunjra & Muhammad Irfan Chani, 2019. "The Impact of Corporate Diversification and Financial Structure on Firm Performance: Evidence from South Asian Countries," JRFM, MDPI, vol. 12(1), pages 1-17, March.
    17. Megginson, William L. & Ullah, Barkat & Wei, Zuobao, 2014. "State ownership, soft-budget constraints, and cash holdings: Evidence from China’s privatized firms," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 276-291.
    18. Liao, Jing & Young, Martin, 2012. "The impact of residual government ownership in privatized firms: New evidence from China," Emerging Markets Review, Elsevier, vol. 13(3), pages 338-351.
    19. Beom Cheol Cin & Young Jun Kim & Nicholas S. Vonortas, 2017. "The impact of public R&D subsidy on small firm productivity: evidence from Korean SMEs," Small Business Economics, Springer, vol. 48(2), pages 345-360, February.
    20. John Joseph & Ronald Klingebiel & Alex James Wilson, 2016. "Organizational Structure and Performance Feedback: Centralization, Aspirations, and Termination Decisions," Organization Science, INFORMS, vol. 27(5), pages 1065-1083, October.
    21. Pierluigi Balduzzi & Jonathan Reuter, 2019. "Heterogeneity in Target Date Funds: Strategic Risk-taking or Risk Matching?," The Review of Financial Studies, Society for Financial Studies, vol. 32(1), pages 300-337.
    22. Weichieh Su & Cheng-Yu Lee, 2013. "Effects of corporate governance on risk taking in Taiwanese family firms during institutional reform," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 809-828, September.
    23. Mary J. Benner, 2010. "Securities Analysts and Incumbent Response to Radical Technological Change: Evidence from Digital Photography and Internet Telephony," Organization Science, INFORMS, vol. 21(1), pages 42-62, February.
    24. Mirko H. Benischke & Geoffrey P. Martin & Lotte Glaser, 2019. "CEO equity risk bearing and strategic risk taking: The moderating effect of CEO personality," Strategic Management Journal, Wiley Blackwell, vol. 40(1), pages 153-177, January.
    25. Cynthia E. Devers & Gerry McNamara & Robert M. Wiseman & Mathias Arrfelt, 2008. "Moving Closer to the Action: Examining Compensation Design Effects on Firm Risk," Organization Science, INFORMS, vol. 19(4), pages 548-566, August.
    26. Meijie Yao & Ciheng Song & Zengji Song, 2018. "State ownership, political connections and entry barriers: evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 25(17), pages 1250-1254, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Qi & Ma, Zhong & Wang, Xinyue & Wu, Di, 2024. "State shareholding in privately-owned enterprises and their ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qi‐an Chen & Shuxiang Tang & Yuan Xu, 2022. "Do government subsidies and financing constraints play a dominant role in the effect of state ownership on corporate innovation? Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3698-3714, December.
    2. Ben-Nasr, Hamdi & Bouslimi, Lobna & Ebrahim, M. Shahid & Zhong, Rui, 2020. "Political uncertainty and the choice of debt sources," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    3. Baili Yang & Abraham Nahm & Zengji Song, 2022. "Succession, political resources, and innovation investments of family businesses: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(2), pages 321-338, March.
    4. Zhu, Ruoyu & Xin, Xiaohui & Tan, Kehu, 2024. "Reverse mixed ownership reform: Does state-owned capital injection inhibit corporate leverage manipulation?," Finance Research Letters, Elsevier, vol. 59(C).
    5. Luo, Lianfa & Cheng, Zhiming & Ye, Qingqing & Cheng, Yanjun & Smyth, Russell & Yang, Zhiqing & Zhang, Le, 2024. "Nonmonetary awards and innovation: Evidence from winning China's Top Brand Contest," China Economic Review, Elsevier, vol. 86(C).
    6. Dongmin Kong & Ling Zhu & Ni Qin, 2022. "Does corruption shape firm centralisation? Evidence from state‐owned enterprises in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3365-3395, September.
    7. Laura Neumeyer & Anna Gründler & Anna-Luisa Stöber, 2023. "Don’t Worry, Be Happy—Does the CEO’s Personality Mitigate the Negative Effect of Financial Constraints on Employee Satisfaction?," Schmalenbach Journal of Business Research, Springer, vol. 75(1), pages 71-98, March.
    8. Han Yu & Abraham Nahm & Zengji Song, 2023. "State‐owned enterprises' political capital, city administrative rank and economic resources acquisition: Empirical evidence from Chinese capital markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 28-42, January.
    9. Zhang, Yijun & Meng, Zhenzhen & Song, Yi, 2023. "Digital transformation and metal enterprise value: Evidence from China," Resources Policy, Elsevier, vol. 87(PB).
    10. Niklas Kreilkamp & Sascha Matanovic & Maximilian Schmidt & Arnt Wöhrmann, 2023. "How executive incentive design affects risk-taking: a literature review," Review of Managerial Science, Springer, vol. 17(7), pages 2349-2374, October.
    11. Joon Mahn Lee & Jung Chul Park & Timothy B. Folta, 2018. "CEO career horizon, corporate governance, and real options: The role of economic short‐termism," Strategic Management Journal, Wiley Blackwell, vol. 39(10), pages 2703-2725, October.
    12. Liu, Yu & Sah, Nilesh & Ullah, Barkat & Wei, Zuobao, 2020. "Financing patterns in transition economies: Privatized former SOEs versus ab initio private firms," Emerging Markets Review, Elsevier, vol. 43(C).
    13. Leon Zolotoy & Don O’Sullivan & Geoffrey P. Martin, 2022. "Behavioural Agency and Firm Productivity: Revisiting the Incentive Alignment Qualities of Stock Options," Journal of Management Studies, Wiley Blackwell, vol. 59(7), pages 1756-1787, November.
    14. Ben-Nasr, Hamdi, 2016. "State and foreign ownership and the value of working capital management," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 217-240.
    15. Peng Zhou & Felix Arndt & Kun Jiang & Weiqi Dai, 2021. "Looking Backward and Forward: Political Links and Environmental Corporate Social Responsibility in China," Journal of Business Ethics, Springer, vol. 169(4), pages 631-649, April.
    16. Yu, Chin-Hsien & Wu, Xiuqin & Zhang, Dayong & Chen, Shi & Zhao, Jinsong, 2021. "Demand for green finance: Resolving financing constraints on green innovation in China," Energy Policy, Elsevier, vol. 153(C).
    17. Qiao, Lu & Fei, Junjun, 2022. "Government subsidies, enterprise operating efficiency, and “stiff but deathless” zombie firms," Economic Modelling, Elsevier, vol. 107(C).
    18. Xiang, Xiaojian & Liu, Chuanjiang & Yang, Mian, 2022. "Who is financing corporate green innovation?," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 321-337.
    19. Christian J. Resick & Sucheta Nadkarni & Jenny Chu & Jianhong Chen & Wan‐Chien Lien & Jaclyn A. Margolis & Ping Shao, 2023. "I Did It My Way: CEO Core Self‐Evaluations and the Environmental Contingencies on Firm Risk‐Taking Strategies," Journal of Management Studies, Wiley Blackwell, vol. 60(5), pages 1236-1272, July.
    20. Xiaohan Guo & Jianliang Ye & Wunhong Su & Deming Luo & Xiangrong Jin, 2022. "Do zombie firms crowd out healthy firms and slow their growth? Evidence from China," Development Policy Review, Overseas Development Institute, vol. 40(6), November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:44:y:2023:i:2:p:1107-1124. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.