Does the type of ownership control matter? Evidence from China's listed companies

Gongmeng CHEN, Michael Arthur FIRTH, Liping XU

Research output: Journal PublicationsJournal Article (refereed)peer-review

427 Citations (Scopus)

Abstract

By tracing the identity of large shareholders, we group China’s listed companies into those controlled by state asset management bureaus (SAMBs), state owned enterprises (SOEs) affiliated to the central government (SOECGs), SOEs affiliated to the local government (SOELGs), and Private investors. We argue that these distinct types of owners have different objectives and motivations and this will affect how they exercise their control rights over the firms they invest in. In particular, we contend that private ownership of listed firms in China is not necessarily superior to certain types of state ownership. To test our arguments we investigate the relative efficiency of state versus private ownership of listed firms and the efficiency of various forms of state ownership. The empirical results indicate that the operating efficiency of Chinese listed companies varies across the type of controlling shareholder. SOECG controlled firms perform best and SAMB and Private controlled firms perform worst. SOELG controlled firms are in the middle. The results are consistent with our predictions.
Original languageEnglish
Pages (from-to)171-181
Number of pages11
JournalJournal of Banking and Finance
Volume33
Issue number1
DOIs
Publication statusPublished - 1 Jan 2009

Bibliographical note

The authors thank the referees and the editors (Professor Giorgio Szego and Professor Fariborz Moshirian) for constructive comments and suggestions. The authors also thank Guochang Zhang, Paul Brockman, and seminar participants at the Hong Kong Polytechnic University and Sun Yat-Sen University for helpful discussions and suggestions.

Funding

Firth acknowledges the financial support of an earmarked grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (LU340307).

Keywords

  • State versus private ownership; Large shareholders; Ownership structure

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