EconPapers    
Economics at your fingertips  
 

How Does Government Control Affect Firm Value? New Evidence for China

Marzieh Abolhassani, Zhi Wang and Jakob de Haan ()

Kyklos, 2020, vol. 73, issue 1, 3-21

Abstract: The role of government involvement in firms has received a lot of attention in the last few decades. Government involvement could result in a ‘supporting hand’ and a ‘grabbing hand’. This paper investigates how government control influences the financial performance of Chinese listed firms. We use a panel data set of firms publicly traded on the stock exchanges of Shanghai and Shenzhen over the period 2009‐2013. Our dataset includes 5501 firm‐year observations. Our results suggest that government control of firms, measured by the shareholdings that are directly and indirectly controlled by the government, is negatively related with firms’ financial performance. More specifically, the return on assets, the return on equity and the market‐to‐book ratio are, on average, 1.3%, 2.0% and 8.2% lower for government‐controlled firms. Both central and local government control is undermining firm performance. These findings provide support for the ‘grabbing hand’ theory of the government. Our results also suggest that the negative effect of government control becomes stronger when firm profitability is higher. Firms with a poor financial performance benefit from government control, which supports the ‘supporting hand’ theory of the government.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/kykl.12216

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:kyklos:v:73:y:2020:i:1:p:3-21

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0023-5962

Access Statistics for this article

Kyklos is currently edited by Rene L. Frey

More articles in Kyklos from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2021-09-11
Handle: RePEc:bla:kyklos:v:73:y:2020:i:1:p:3-21