Does the type of ownership control matter?Evidence from China’s listed companies q
Gongmeng Chen a,1,Michael Firth b,*,Liping Xu c,2
a
Antai School of Management,Shanghai Jiaotong University,Shanghai,China
b
Department of Finance and Insurance,Lingnan University,Tuen Mun,New Territories,Hong Kong c
Department of Accounting,School of Business,Sun Yat-Sen University,Guangzhou,China
Received 12February 2006;accepted 11December 2007
Available online 1January 2008
Abstract
By tracing the identity of large shareholders,we group China’s listed companies into tho controlled by
state ast management bureaus (SAMBs),state owned enterpris (SOEs)affiliated to the central government (SOECGs),SOEs affiliated to the local govern-ment (SOELGs),and Private investors.We argue that the distinct types of owners have different objectives and motivations and this will affect how they exerci 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 Chine 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.
Ó2008Elvier B.V.All rights rerved.
JEL classification:G32;G34
Keywords:State versus private ownership;Large shareholders;Ownership structure
1.Introduction
China’s economy has undergone a significant transfor-mation in the past quarter-century.Large swathes of indus-try have been reorganized as corporations and the profitable operating arms of many state owned enterpris (SOEs)have been privatized and listed on the stock mar-ket.Today,there are more than 1500listed firms and Chi-
na’s market capitalization is the sixth largest in the world.Many companies are becoming world leaders;as one exam-ple,PetroChina is now the largest listed company in the world in terms of market capitalization.In many ways the economic reforms can be regarded as a major success.Annual economic growth has averaged 10%in the past dec-ade,exports have incread many-fold,foreign rerves are the largest in the world,and the marginal productivity of labor has incread substantially.Despite the success,the profitability of listed firms has been poor (Chen et al.,1998,2006a )and this rais concerns about firms’sustain-ability and financial distress.
Some studies have suggested that the state’s retained shareholdings in listed firms have been responsible for their poor profitability.However,the studies have shortcom-ings as they fail to properly identify and distinguish among the different types of owners (Wang,2003).In particular,
0378-4266/$-e front matter Ó2008Elvier B.V.All rights rerved.doi:10.1016/j.jbankfin.2007.12.023
任凭风浪起q
This paper was reviewed and accepted while Professor Giorgio Szego was the Managing Editor of The Journal of Banking and Finance and by the past Editorial Board.*
Corresponding author.Tel.:+852********.
E-mail address:cgm@sjtu.edu (G.Chen),mafirth@ln.edu.hk (M.Firth),xuliping@mail.sysu.edu (L.Xu).1
Tel.:+862152301150.2
Tel.:+862084113648./locate/jbf何处是归程
Available online at
Journal of Banking &Finance 33(2009)
171–181
prior rearch us share type as a proxy for owner type but we demonstrate that this assumption is not valid and can lead to erroneous conclusions.The aim of this paper is to remedy the shortcomings in prior rearch by providing an in-depth examination of the relations between owner-ship structures andfirms’performance in China.A key fea-ture of many of China’s privatized state owned enterpris is that the state retains a significant ownership stake after listing;in this n privatizedfirms are actually partially-privatized.Although the state often retains substantial ownership in listedfirms,this ownership is scattered among various agencies and each of the have different motiva-tions and incentive structures.We argue that the different forms of state ownership lead to different performance out-comes for thefirms they have invested in.Thus the lumping of all types of state ownership into one group,as has been done in prior studies,obscures the real impact of the state as a shareholder.We also argue that it is imperative to determine who the real share owners ,go behind nominee names),and what their motives are,rather than rely on the legal definition of shares as a proxy for owner-ship type.
A distinct characteristic of Chine listedfirms is that they have a single dominant shareholder who ownership far exceeds that of the cond largest shareholder.We clas-sify the dominant shareholder into tho that are state owned and tho that are private.State ownership offirms is frequently critici
zed becau of political intervention and the need to help achieve government objectives(Boycko et al.,1996).The studies implicitly assume there is just one type of state owner.However,in China,the state’s ownership offirms is undertaken by different types of agen-cies and we argue that the objectives of the agency-types dictate the extent of political intervention and the degree of commercialization of the listed companies they invest in. We classify state owners in China’s listed companies into three major types bad on their political and economic interests:SAMBs(state ast management bureaus),SOE-CGs(SOEs affiliated to the central government),and SOE-LGs(SOEs affiliated to the local government).We argue that the three types of state owners have very different objectives when it comes to the listedfirms they control.
Wefind that SOECG controlled listedfirms excel in almost every way when compared to other ownership types.By contrast,listedfirms controlled by SAMBs do badly in almost every respect.SOELG controlledfirms are in the middle.We alsofind that Private investors,as the dominant shareholders of publicfirms,are not much better than SAMBs in terms of their associations withfirm performance.The performance of Private controlled listed firms casts doubts on the claims thatfirms perform best when the state is completely abnt from ownership(Dew-enter and Malatesta,2001;Green,2004;Megginson and Netter,2001;Shleifer,1998),at least in the ca of China.
询盘英文范文This study contributes to the literature in veral ways. First,it contributes to the literature on state versus private ownership.As we have Private controlledfirms in our sam-ple we can directly examine this issue in the context of China.3In a transitional economy with a weak legal envi-ronment,the governance mechanisms of state and private ownership are different from tho in either a planned economy or a developed market economy.Wefind that commercialized state ownership has its advantages in the circumstances.Thus,certain types of state ownership can be superior to private ownership when the institutional environment is relatively underdeveloped and when law enforcement is capricious and weak.Second,our study supplements the literature on transition economies.The type of privatization and the form of state ownership are major concerns in the economies(Stiglitz,1999).We pro-vide empirical evidence that certain types of state owner-ship help improvefirm performance.
Finally,our study contributes to the literature on own-ership and control.Numerous studies address the relations between ownership structure andfirm performance(e Denis and McConnell,2003,for a review).Wefind that the relation between large shareholders andfirm perfor-mance depends on who the large shareholders are.We doc-ument an alignment effect where higher ownership of the dominant shareholder is associated with betterfirm performance.全国高考
The rest of the paper is organized as follows:Section2 identifies the types of large shareholders in China’s listed companies and describesfirms’ownership structures.Sec-tion3discuss the motivations and objectives of the differ-ent types of large shareholders.Section4explains the rearch design and Section5reports the empirical results. Section6tests rever causality and Section7reports tests for robustness and investigates the association between ownership concentration andfirm performance and the role of outside blockholders.Section8concludes the study.
2.Ownership structure of China’s listed companies
According to China’s laws,a listedfirm has six types of shares:state,legal person,foreign,management,employee, and individual shares.The shares have the same cash flow ,they are entitled to the same dividends) and voting rights.Management,foreign,and employee shares reprent less than2%of the outstanding shares and so they do not constitute major voting blocks.State and legal person shares are not tradable on the stock exchange and they have concentrated ownership.4In con-trast,domestic individual shares are tradable and widely held.
Prior studies have generally focud on the relations between state shares,legal person shares,individual shares,
3Prior studies that u data from the1990s and early2000s do not have Private controlledfirms in their samples.
4China has recently undergone a share reform program where state and legal person shares will become tradable after the end of a lock-up period. For mostfirms the lock-up period will end in2007/8and the shareholders can then ll up to5%of their shares in the following six months.
172G.Chen et al./Journal of Banking&Finance33(2009)171–181
andfirm performance(Sun and Tong,2003;Wei et al., 2005).However,placing reliance on the legal definition of shares to infer investor type is very simplistic and ignores institutional realities(Green,2004;Wang,2003).Most importantly,legal person shares can be owned by a number of heterogeneous entities,ranging from solely state owned enterpris to privatefirms.The entities have different objectives and incentives and so grouping them together, as done in previous studies,distorts the results and leads to erroneous conclusions.Similarly,state shares can be owned by different types of investors.Another problem that has plagued prior rearch is the failure to identify the dominant shareholder and who that entity(or person) is.In this study,we investigate the ownership of China’s listed companies bad on the real identity of the large shareholders.
Our detailed investigation uncovers four main types of controlling shareholders in China’s listed companies.They are state ast management bureaus(SAMBs),SOEs affili-ated to the central government(SOECGs),SOEs affiliated to the local government(SOELGs),and Private investors. All of the investors exerci their control through the ownership of state or legal shares.
2.1.The state ast management bureaus(SAMBs)
SAMBs typically own the state shares and sometimes the legal person shares of the listedfirms they invest in. In most provincial cities,a state ast management bureau, or the state ast operating company,has been established to manage state asts.SAMBs are shareholding institu-tions that belong to the state.
2.2.SOEs affiliated to the central government(SOECGs)
SOECGs refer to the157SOEs controlled by the central government under the State-owned Asts Supervision and Administration Commission(SASAC).Branches of the central government established the SOEs.Administra-tively,the SOEs belong to and are cloly monitored by the central government,but they are located across the country and are involved in various industries.The com-panies are usually big and/or nation-wide companies,such as Sinopec Corp.,t
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he China Merchants Group,and so on.5 They are subject to strict monitoring.
2.3.SOEs affiliated to local governments(SOELGs)
SOELGs are SOEs controlled directly by a local govern-ment.The SOEs constitute the largest group of control-ling shareholders of listed companies in China.The listed companies they control are typically spin-offs from the SOE.SOELGs and SOECGs operate as profit-making entities and they can invest in the‘state’and‘legal person’shares of listedfirms.
2.4.Private investors
This group of large shareholders includes both private firms and individuals.However,listedfirms directly con-trolled by individuals only appear after2001when the ‘Tian Tong Corp.’was listed,since prior to1998Chine laws prohibited natural persons from directly holding more than0.5%of the shares of a listed company.In most cas a Private investor becomes the largest controlling share-holder through the acquisition of non-tradable shares of the former large state shareholders either at the time of the IPO or subquently.More recently,there are cas where a Private investor has built up a company and then listed it on the stock exchange.The shares held by control-ling Private investors are usually legal person shares and at the time of our study they could not be traded on th
e stock market.
3.Motivations of controlling shareholders
Firms that have a Private investor as their dominant shareholder are actively monitored by that shareholder. Indeed,the Private investors often install themlves or their reprentatives as the CEO and the chairman of the listedfirm.A Private investor typically has detailed knowl-edge of the industry in which thefirm operates and so they can more easily enter into the management function or more effectively monitor the hired managers.A Private investor receives the cash dividends paid by the listedfirm and the investor(if it is a company)us consolidated or equity accounting to incorporate the listedfirm’s earnings into its own income statement.Agency problems associated with the paration of ownership and management will be small when a Private investor is the dominant shareholder.
A much bigger concern for the minority shareholders of listedfirms that are controlled by a Private investor is that their income and asts could be diverted or expropriated away by the dominant investor6(Shleifer and Vishny, 1997).Unlike SAMBs and SOEs,Private investors are not subject to monitoring by the state and so it is easier for a controlling Private investor to expropriate(or tunnel)th
e income and asts of the listedfirm away from the minority shareholders.Private controlled listedfirms are therefore subject to a greater risk of diversion of asts by large share-holders.Given the conflicting influences,we do not know a priori whetherfirms controlled by Private investors per-form better than tho controlled by state entities.
While SAMBs and SOEs are ultimately owned by the state,they are different in many respects.First,SAMBs
5The SOEs are owned by the state although they have substantial
autonomy over their activities.They are able to invest in listedfirms and in many cas they have a substantial shareholding that gives them outright or de facto control.
6Recent publicized cas of expropriations by dominant Private investors include the listedfirms Beer Flower,Top Software,Jiangsu Qionghua,Xinjiang Tunhe,ST Chundu,Yi’an Tech,and Hongzhi Tech.
G.Chen et al./Journal of Banking&Finance33(2009)171–181173
and SOEs differ as owners of listed companies in terms of the risk borne and benefits shared.Official
s of SAMBs have the right to lect the boards of directors and managers of SOEs,but bear no risks of the conquences of their lec-tions(Zhang,1998).Therefore,voting rights in their hands are typically‘cheap vote rights’(Harris and Raviv,1988). The promotion of SAMB officials depends largely on how well they execute the instructions of the central or local government rather than on how much they contribute to creatingfirm value and dividend revenues.Political intervention is more likely if a listedfirm is controlled by a SAMB.
SAMB officials are civil rvants paid by the govern-ment and their remuneration and rewards have nothing to do with the performance of the listed companies they overe.The SAMBs collect the dividends distributed by listedfirms and deliver them to the state treasury.The offi-cials have no right to u the dividend revenues.There-fore,the officials’well-being is not tied to the performance of thefirms they are delegated to control. The SAMB officials typically have no relevant industry experience and so they lack the necessary skills to effec-tively monitor afirm’s managers and they lack the knowl-edge to provide strategic advice.This problem is exacerbated as the officials have to look after the state’s shareholdings in manyfirms and thefirms are in a diver t of industries.In addition,SAMBs are prohibited from being very clo to the listed companies they control and this increas information asymmetry.Of all the ownership types,SAMBs are the least likely to expropriate wealth away from the minority shareholders(Deng et al.,2007).
SOEs have both the motives and the experti to moni-tor managers of the listed spin-offfirms and to provide strategic advice.Cashflows(dividends)and earnings(via consolidated and equity accounting)of listedfirmsflow through to the SOE investors and so they have incentives to appoint good managers and to monitor them.The moti-vations of SOEs to expropriate asts from a listedfirm, and their ability to do so,lie somewhere between tho of SAMBs and Private investors.While SOEs can benefit from expropriations,the investors are subject to moni-toring by government ministries and state regulators.In summary,compared with SAMBs,SOEs have better risk bearing and benefit sharing mechanisms,exerci better monitoring,and are subject to less political intervention.
Distinctions should be made among SOEs affiliated to the central government(SOECGs)and tho affiliated to local governments(SOELGs).First they differ as to the extent of the monitoring to which they are subject.SOE-CGs belong to the central government and are subject to strict supervision and monitoring from a number of depart-ments under the central government including the National Audit Office(NAO).The chairmen of SOECGs are care-fully chon for their ability and many of them eventually become Vice Ministers of the state.It is important that the chairmen do well in their jobs so that they do not jeopardize their move up the state hierarchy.Local govern-ments manage the stat
e’s asts(via SOELGs)according to national law and regulations although they can also make their own policies,especially in terms of designing the orga-nization’s hierarchy.SOELGs are subject to the supervi-sion and management either of the local government directly,or of state ast management bureaus at the local government level.SOECGs and SOELGs also differ in how well they obrve the laws and regulations of China.Laws and regulations are more difficult to enforce the further away the parties are from the center of power and so SOE-LGs are subject to weaker supervision and management. Bad on the motivations of SOEs and the degree of mon-itoring they face(by the government)we argue that SOE-CGs are more effective as dominant shareholders of listed firms than are SOELGs.
4.Rearch design
4.1.Sample
For each listedfirm in our sample we identify the major shareholder and the other top10shareholders.We take great care to identify the true owner of the , we go behind the nominee names)and to classify them into shareholder types(SAMB,SOECG,SOELG,and Private). The sample period is1999–2004.7We excludefirms for which operating performance data are not av
ailable.The final sample consists of6113firm-year obrvations.SOE-LG is the major controlling shareholder for3065(50.14%)firm-year obrvations.Then follow Private with1241 (20.3%)obrvations,SAMB with968(15.84%),and SOE-CG with839(13.72%).The industry distributions of the samplefirms are similar across the four ownership types.
Table1,Panel A,shows the exact holdings by each of the three largest shareholders.Wefind that the largest shareholder contributes most to the concentrated owner-ship in China’s listed companies.Overall,the median of the largest shareholder’s holding is42.61%,but the median of the cond largest investor’s holding is just5%,and the third is1.89%.If we define blockholders as shareholders who own5%or more of the shares of a company,we con-clude that a typical Chinefirm has a single blockholder (e Panels B and C,Table1).This holds true for compa-nies with SAMBs,SOECGs and SOELGs as the largest shareholders.However,companies with a Private investor as the largest shareholder typically have two blockholders, although the cond blockholder has only about one-third the shares of the largest blockholder(means of11.96%and 32.14%,respectively).
7We choo1999as the starting year becau in1998China’s listed companies adopted new generally accepted accounting principles(GAAP). Thus,prior to1999,financial statement data are less
consistent across firms and across time.Chine GAAP applies to all listedfirms regardless of who the dominant shareholder is.
174G.Chen et al./Journal of Banking&Finance33(2009)171–181
We also investigate ownership after combining affiliated investors as one shareholder.8Here,affiliated investors refer to investors belonging to the same parent company, or to investors where one investor belongs to another,or to investors who belong to each other(reciprocal owner-ship).Overall,the ownership by the largest shareholder (including affiliated owners)is45.47%(mean)and45.2% (median).A comparison of Panels A and B indicates that including the shareholdings of affiliated investors increas the mean ownership of the largest investor by about1.72% (43.75%to45.47%)and increas the median by about 2.59%.
政治民主化Table1,Panel C,reports the number of blockholders and the ownership mix matrix of samplefirms.54.05%of samplefirm years have a single blockholder,27.99%have two,12.29%have three,and5.67%have four or more blockholders.Since the largest shareholder has far greater ownership than the other blockholders,we refer to non-affiliated blockholders other than the largest as outside blockholders.Private controlledfirms have more outside blockholders than the other contro
l-types;in26.03%of cas there is just one ,the Private control-ling shareholder and no outside blockholder)and in 40.29%of cas there are two.
Although all shareholders have equal voting rights (one-share,one-vote),our analysis clearly indicates that the largest shareholder is generally able to control the firm.The control feature of the largest stockholder is rec-ognized in The Code of Corporate Governance for Listed firms in China,issued by the China Securities Regulatory Commission(CSRC).The Code states that the major stockholder in a listedfirm should be pro-active in mak-ing recommendations to the board.The motives and dili-gence of the largest shareholder is therefore a key ingredient to the success of listedfirms.We examine com-pany records to determine who attends the general share-holders’meeting and thus who gets to cast their votes. From our analysis we conclude that large shareholders are able to gain unbridled control overfirms due to the fact that small outside investors fail to attend the meeting and exerci their voting rights.On average,the largest shareholder constitutes84%of the voting shares prent at the general meeting,which means that the largest shareholder decides almost everything.Typically,the shareholdings of all block shareholders who attend the meeting constitute93%of the voting shares.Although all shareholders are able to express their views at the gen-
Table1
Ownership concentration for samplefirm years
SAMB(Obs.968)SOECG(Obs.839)SOELG(Obs.3065)Private(Obs.1241)ALL(Obs.6113)
Mean Median Mean Median Mean Median Mean Median Mean Median Panel A:Top three shareholders a
自我剖析怎么写
Pct by largest shareholder41.2838.5649.6251.7947.6249.1832.1428.9943.7542.61 Pct by cond largest shareholder 6.99 4.467.13 3.967.27 3.5511.9611.368.16 5.00 Pct by third largest shareholder 2.75 1.75 3.01 1.38 2.76 1.40 5.13 4.19 3.27 1.89 Combined ownership by
top three shareholders
51.0251.2359.7560.5957.6459.3149.2449.9155.1856.31
SAMB(Obs.968)SOECG(Obs.839)SOELG(Obs.3065)Private(Obs.1241)ALL(Obs.6113)
Mean Median Mean Median Mean Median Mean Median Mean Median Panel B:Ownership concentration after combining affiliated shareholders b
Sum of ownership by all blockholders c49.2849.3959.1160.4356.3658.1749.3349.5154.1955.73 Number of blockholders 1.63 1.00 1.52 1.00 1.58 1.00 2.21 2.00 1.71 1.00 Ownership by largest shareholder41.9939.3752.6154.8749.0350.8934.5729.4345.4745.20 Ownership by outside blockholders7.290.00 6.490.007.330.0014.7713.688.720.00
SAMB(Obs.968)SOECG(Obs.839)SOELG(Obs.3065)Private(Obs.1241)ALL(Obs.6113)
N Pct N Pct N Pct N Pct N Pct Panel C:Number of blockholders
155357.1353964.24188961.6332326.03330454.05 22712820023.8474024.1450040.29171127.99 39810.12688.12979.6928823.2175112.29 4or above46 4.7532 3.82139 4.5413010.47347 5.67 Total968100839100306510012411006113100
a The ownership calculation does not correct for the possibility that the large shareholders are affiliated with each other,or that the companies themlves own the shares of its shareholders,or take account of pyramid structures.
b Affiliated shareholders are combined as one.Affiliated shareholders refer to tho shareholders belonging to the same parent or grandparent company, or to shareholders where one shareholder belongs to another,or to shareholders who belong to each other(reciprocal ownership).
c Blockholder is define
d as shareholders that hold,directly or indirectly,5%or mor
e o
f the total outstandin
g shares of afirm.
8Otherwi,the concentration of ownership would be underestimated.
心理辅导In our empirical tests reported later,we include shareholdings held by
affiliates in the large shareholder’s ownership.However,replications of the
tests using just the shareholder’s ownership yield similar conclusions.
G.Chen et al./Journal of Banking&Finance33(2009)171–181175
