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Pyramidal structure, risk‐taking and firm value: Evidence from Chinese local SOEs

Kun Su, Rui Wan and Victor Y. Song

The Economics of Transition, 2018, vol. 26, issue 3, 401-427

Abstract: This article investigates the relationship among pyramidal layers, risk‐taking and firm value using a sample of local state‐owned enterprises (SOEs) in China. We find that state‐pyramidal layers have a positive and significant impact on firm risk‐taking and firm value, suggesting that the pyramidal structure formed by the state protects SOEs from political intervention. Risk‐taking is conducive to enhancing firm value and is one of the important channels through which state‐pyramidal layers increase firm value. By exploring the role of state‐pyramidal organizational structures in improving SOEs' risk‐taking, our results contribute to both corporate governance and corporate finance literature.

Date: 2018
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