The efficiency and profitability effects of China's modern enterprise restructuring programme

Purpose – In the mid‐1990s, China introduced the Modern Enterprise System (MES) to selected state‐owned enterprises (SOE). The paper aims to examine whether this reform led to improved efficiency and profitability. Design/methodology approach – The efficiency and performance of enterprises before and after the economic restructuring are examined. Univariate and multivariate (regression) analyses are used to investigate whether there has been a significant change in an enterprise's performance. Findings – The paper finds there is no improvement in efficiency and profitability after the restructuring. This can be attributed the lack of improvement to the state's ownership of enterprises, bureaucratic management, and poor corporate governance. These things have to change in order to improve corporate efficiency and performance. Originality/value – China's reform of SOEs is very important to the economic well‐being of the country. This paper is the first to investigate the MES as applied to wholly state‐owned enterprises.