Corporate Governance Mechanisms, Ownership and Firm Value: Evidence from Listed Chinese Firms

Yusheng Kong, Takuriramunashe Famba, Grace Chituku-Dzimiro, Huaping Sun and Ophias Kurauone
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Yusheng Kong: School of Finance & Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang 212013, China
Grace Chituku-Dzimiro: Department of Accounting & Finance, Grace Chituku-Dzimiro, Chinhoyi University of Technology, Chinhoyi 263, Zimbabwe
Huaping Sun: School of Finance & Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang 212013, China
Ophias Kurauone: School of Finance & Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang 212013, China

IJFS, 2020, vol. 8, issue 2, 1-26

Abstract: This study analyzes corporate ownership as a corporate governance mechanism and its role in creating firm value. Previous research shows that there is no convergence on the firm-value corporate ownership relationship. Most research in this area takes a cross national approach ignoring the uniqueness of each institutional setting particularly those of emerging nations. Using a unique firm level dataset, we investigate how corporate control nature and ownership concentration affect the value of Chinese listed firms. First, non-state owned control is associated with a higher Tobin’s Q while a negative premium is found for state owned. Using the hybrid and the correlated random effects model we confirm a U-shaped non-linear relationship between ownership concentration and Tobin’s Q, implying that firm value first decreases and then increases as block holders own more shares. Further investigation reveals that the negative effect of ownership concentration is weaker when a firm equity nature is non-state owned enterprises (non-SOEs) compared to state-owned enterprises (SOEs). While ownership concentration appears to be an efficient mechanism for corporate governance its effect is weaker for SOEs compared to non-SOEs. The results support privatization of SOEs, sound reforms such as the split share structure reform as crucial for the development of China’s stock market.

Keywords: corporate governance; firm value; ownership concentration; block holder ownership; emerging economies; Chinese listed firms (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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