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Retained State Shareholding in Chinese PLCs: Does Government Ownership Reduce Corporate Value?

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  • Estrin, Saul
  • Tian, Lihui

Abstract

The role of government shareholding in corporate performance is central to an understanding of China’s newly privatized large firms and the stock market. In this paper, we analyse shareholders as agents that can both harm and benefit companies. We examine the ownership structure of 826 listed corporations and find that government shareholding is surprisingly large. Its effect on corporate value is found to be negative, but non-monotonic. Up to a certain threshold, corporate value decreases as government shareholding stakes increase, but beyond this corporate value begins to increase. We interpret this in terms of ownership concentration and the advantages of government partiality.

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  • Estrin, Saul & Tian, Lihui, 2005. "Retained State Shareholding in Chinese PLCs: Does Government Ownership Reduce Corporate Value?," CEPR Discussion Papers 4919, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4919
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    Cited by:

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    2. Kang, Young-Sam & Kim, Byung-Yeon, 2012. "Ownership structure and firm performance: Evidence from the Chinese corporate reform," China Economic Review, Elsevier, vol. 23(2), pages 471-481.
    3. Jin-Hui Luo & Heng Liu, 2014. "Family-Concentrated Ownership in Chinese PLCs: Does Ownership Concentration Always Enhance Corporate Value?," IJFS, MDPI, vol. 2(1), pages 1-19, February.
    4. Trien Le & Trevor Buck, 2011. "State ownership and listed firm performance: a universally negative governance relationship?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(2), pages 227-248, May.
    5. Saul Estrin & Martha Prevezer, 2011. "The role of informal institutions in corporate governance: Brazil, Russia, India, and China compared," Asia Pacific Journal of Management, Springer, vol. 28(1), pages 41-67, March.
    6. Tina He & Wilson Li & Gordon Tang, 2012. "Dividends Behavior in State- Versus Family-Controlled Firms: Evidence from Hong Kong," Journal of Business Ethics, Springer, vol. 110(1), pages 97-112, September.
    7. Wei Huang & Agyenim Boateng, 2013. "The role of the state, ownership structure, and the performance of real estate firms in China," Applied Financial Economics, Taylor & Francis Journals, vol. 23(10), pages 847-859, May.
    8. Trien Le & Amon Chizema, 2011. "State ownership and firm performance: Evidence from the Chinese listed firms," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 2(2).

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    More about this item

    Keywords

    China; Corporate governance; government shareholding;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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