Improving corporate governance where the State is the controlling block holder: Evidence from China

Henk Berkman, Rebel A. Cole () and Lawrence Fu

MPRA Paper from University Library of Munich, Germany

Abstract: We examine changes in market values and accounting returns for a sample of publicly traded Chinese firms around announcements of block-share transfers among government agencies (“State Bureaucrats”), market-oriented State-owned enterprises (“MOSOEs”) and private investors (“Private Entities”). We provide evidence that transfers from State Bureaucrats to Private Entities result in larger increases in market value and accounting returns than transfers to MOSOEs. We also find that CEO turnover occurs more quickly when shares are transferred to Private Entities. Moreover, we find that the changes in firm value and accounting returns, as well as the likelihood of CEO turnover, are all functions of the incentives and managerial expertise of the new block holder. We conclude that corporate governance can be improved at State-controlled firms by improving the incentives and managerial expertise of controlling block holders, and that this is better accomplished by transferring ownership to private investors rather than by shuffling ownership among Statecontrolled entities.

Keywords: block-holder identity; China; partial corporate control; partial privatization; privatization; State ownership; SOE. (search for similar items in EconPapers)
JEL-codes: G38 G34 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-cna, nep-cta and nep-tra
Date: Written
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