Ownership structure and performance of Chinese SOEs
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Previous empirical studies have shown that ownership structure is significantly linked to a company’s performance. The main purpose of this paper is to evaluate the government ownership issue in China’s State-owned Enterprises (SOEs). A database has been obtained from CSMAR (China Stock Market and Accounting Research) consisting of 1538 listed firms during a five year period from 2003 to 2007. Subsequently, Chung and Pruitt’s (1994) modified version of Tobin’s Q is used to measure the firm’s performance to run an Ordinary Linear Regression (OLS) analysis against other eight independent variables. I find that direct or indirect government ownership through State and Legal person holdings as well as untradeable shares all have significant negative effects on firm performance. Meanwhile, central government controlled SOEs have outperformed local government controlled ones slightly. The results seem to suggest that further privatisation and removal of trading restrictions should be implemented to improve efficiency and profitability of publicly owned firms.