The authors investigate whether ownership structure significantly affects the performance of publicly listed firms in China and if so, in what way. With publicly listed stocks, one can quantify the ownership mix and concentration, which makes it possible to study this issue. The authors use the recent literature on the role of large institutional shareholders in corporate governance as a theoretical base. A typical listed stock company in China has a mixed ownership structure, with three predominant groups of shareholders -the state, legal persons (institutions), and individuals- each holding about 30 percent of the stock. (Employees and foreign investors together hold less than 10 percent.) Ownership is heavily concentrated: the five largest shareholders accounted for 58 percent of outstanding shares in 1995, compared with 57.8 percent in the Czech Republic, 42 percent in Germany, and 33 percent in Japan. Their empirical analysis shows that the mix and concentration of stock ownership do indeed significantly affect a company's performamce: there is a positive, significant correlation between concentration of ownership and profitability; the effect of concentrated ownership is greater with companies dominated by institutions than with those dominated by state; the firms' profitability is positively correlated with the fraction of legal person (institutional) shares; it is either negatively correlated or uncorrelated with the fraction of state shares and with tradable A-shares held mostly by individuals. Labor productivity tends to decline as the proportion of state shares increases.
Details
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Author
Xiaonian Xu Yan Wang
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Document Date
1997/06/30
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Document Type
Policy Research Working Paper
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Report Number
WPS1794
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Doc Name
Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies
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Keywords
legal person;stock company;market value of equity;book value of equity;book value of asset;book value of debt;supervisory committee;state share;ownership concentration;number of shares;total market capitalization;real estate industry;return on asset;number of shareholders;national stock exchange;ownership structure;short term trade;free rider problem;long term growth;benefits to employee;forms of ownership;central government agency;owner of state;joint stock company;investment time horizon;average holding period;factor of production;hong kong dollar;government investment company;full time job;managers of state;net present value;degree of autonomy;initial public offering;prices of input;total factor productivity;concentration of ownership;individual shareholders;outstanding share;corporate governance;large shareholder;
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Citation
Xiaonian Xu Yan Wang
Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies (English). Policy, Research working paper ; no. WPS 1794 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/801241468746710267/Ownership-structure-corporate-governance-and-corporate-performance-the-case-of-Chinese-stock-companies