Do Ownership Structures Stimulate the Performance of Listed Firms in China?

Abstract

State-owned enterprise (SOEs) reform is a significant factor in China's economic growth. The strategic importance of the SOE sector to the Chinese economy cannot be underestimated. Whilst they have experienced significant progress, there are some important unresolved challenges to be addressed for the reforms to produce effective free market corporations. A significant aspect of the reform process is SOE ownership structures, in particular, as the state monopoly is exchanged for ownership structures that are more market oriented. This study investigates whether Legal Person and non-state ownership structures have significant influence on the performance of listed firms in China. It also investigates what level of institutional ownership may be the most advantageous. Thus, this research paper contributes to the ongoing body of work relating to ownership structures in China. The empirical study found that ownership structure is a key element in corporate performance in China. The most significant findings suggest that institutional ownership, through the Legal Person holding companies, have a positive bearing on the performance of listed firms, as do non-state ownership structures, though not to the same extent. And secondly, that the level of Legal Person ownership was a significant factor in firm performance in China.