Equity Diversification and Capital Allocation Efficiency: Evidence from China’s Mixed Ownership Reform

Qi Wang () and Zhong Ma ()
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Qi Wang: Beijing Jiaotong University
Zhong Ma: Beijing Jiaotong University

A chapter in IEIS 2021, 2022, pp 37-44 from Springer

Abstract: Abstract This study investigates the impact of equity diversification on the efficiency of corporate capital allocation. Using A-share listed Chinese state-owned companies in 2009–2016, we empirically test the relationship between equity diversification and capital allocation efficiency and find that introducing non-state capital into state-owned enterprises can significantly improve the efficiency of state-owned enterprises’ capital allocation. We use China’s “mixed ownership reform” to construct a DID model to overcome the endogenous problem. Further tests show that the higher the participation of non-state shareholders, the more efficient the capital allocation of state-owned enterprises. Our results provide evidence for China’s State-owned enterprise reform.

Keywords: Equity diversification; Capital allocation efficiency; Mixed ownership reform (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnopch:978-981-16-8660-3_5

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DOI: 10.1007/978-981-16-8660-3_5

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