Ownership, Institutions & Firm Value: Cross-Provincial Evidence from China

Boya Wang

Working Papers from Centre for Business Research, University of Cambridge

Abstract: The distinctive political-economic setups of emerging economies engender special corporate governance issues that warrant added attention to the broader institutional environments. Using a unique provincial firm-level dataset, we investigate how control natures, ownership concentration, and provincial differences in government quality and financial deregulation jointly affect the market value of Chinese listed companies. Firstly, the presence of a central government controller is generally associated with higher Tobin's Q, while a negative premium is found for firms ultimately controlled by local governments. We then use alternative concentration measures and an instrumental variable approach to confirm a nonlinear relationship between blockholder ownership and Tobin's Q, implying that firm value first decreases and then increases as blockholders own more shares. Further analysis reveals that government quality has a significant, positive moderating effect on the relationship between different control natures and firm value, while the valuation effect of ownership concentration also depends on regional financial development.

Keywords: Control natures; ownership concentration; government quality; financial development; firm value (search for similar items in EconPapers)
JEL-codes: G31 H77 P30 P48 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-cfn and nep-cna
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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