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Politician control, agency problems and ownership reform

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  • Lixin Colin Xu
  • Tian Zhu
  • Yi-min Lin

Abstract

Using data from a recent national survey on the ownership reform of state-owned enterprises in China, we study the effects of reducing politician control and agency problems on a number of reform outcomes. Taking into account the endogenous nature of the reform, we find that these outcome measures of the reform's success are positively affected by the lessening of politician control through increasing the firm's flexibility in labour deployment and by the mitigation of agency costs through the introduction of more effective corporate governance mechanisms such as one-share one-vote and shareholding-based board structure composition. Ownership structure also matters: relative to shareholding by the state, foreign ownership has a positive effect on reform outcomes; individual (mostly employee) shareholding has a negative or insignificant effect. Somewhat surprisingly, operating autonomy (excluding labour deployment flexibility) has a negative effect on firm performance, suggesting serious agency problems in the reformed enterprises. Copyright (c) The European Bank for Reconstruction and Development, 2005.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal The Economics of Transition.

Volume (Year): 13 (2005)
Issue (Month): 1 (01)
Pages: 1-24

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Handle: RePEc:bla:etrans:v:13:y:2005:i:1:p:1-24

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Cited by:
  1. Kato, Takao & Long, Cheryl, 2006. "CEO Turnover, Firm Performance and Enterprise Reform in China: Evidence from New Micro Data," IZA Discussion Papers 1914, Institute for the Study of Labor (IZA).
  2. Lindbeck, Assar, 2006. "Economic-Social Interaction during China’s Transition," Working Paper Series 680, Research Institute of Industrial Economics.
  3. Liang Sun & Chun Liu, 2012. "Capital province, political objectives and the post-IPO policy burden," China Finance Review International, Emerald Group Publishing, vol. 2(2), pages 121-142, April.

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