Control Modes and Outcomes of Transformed State-Owned Enterprises in China: An Empirical Test

Shaomin Li, Jun Xia, Cheryl Xiaoning Long and Justin Tan

Management and Organization Review, 2012, vol. 8, issue 2, 283-309

Abstract: The transformation of state-owned enterprises (SOEs) into efficient entities has been an important approach in transition economies. However, the transition literature reveals little about how control structure affects firm performance of transformed SOEs. Drawing on agency theory, we distinguish three modes of control in transformed SOEs: state-controlled, dispersedly controlled, and privately controlled modes and argue that actual control after transformation plays a critical role in determining performance. Examining the impact of different control modes in China, we find that the key is who controls the transformed firm. Non-state-controlled (dispersedly controlled and privately controlled) firms are more likely to have enhanced post-transformation performance and reduced agency costs than state-controlled firms.

Date: 2012
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