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The helping hand, the lazy hand, or the grabbing hand? Central vs. local government shareholders in publicly listed firms in China

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Author Info

  • Cheung, Yan-Leung
  • Rau, P. Raghavendra
  • Aris, Stouraitis

Abstract

We analyze related party transactions between Chinese publicly listed firms and their stateowned enterprise (SOEs) shareholders to examine whether companies benefit from the presence of government shareholders and politically connected directors appointed by the government. We find that related party transactions between firms and their government shareholders seem to result in expropriation of the minority shareholders in firms controlled by local government SOEs or with a large proportion of local government affiliated directors on their board, and in provinces where local government bureaucrats are less likely to be prosecuted for misappropriation of state funds. On the other hand, firms controlled by the central government (or with a large proportion of central government affiliated directors) are benefited in their related party transactions with their central government SOEs.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/15747/1/WP2008-11a.pdf
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Bibliographic Info

Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2008-11.

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Length: 31, [15] p.
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:hit:hitcei:2008-11

Note: February 2008
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Related research

Keywords: Law and economics; Government ownership; China; State-Owned Enterprises (SOE); Related party transactions; Political connections;

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References

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  1. Yan-leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2004. "Tunneling, Propping and Expropriation Evidence from Connected arty Transactions in Hong Kong," Working Papers 092004, Hong Kong Institute for Monetary Research.
  2. Joachim Voth & Thomas Ferguson, 2008. "Betting on Hitler: The value of political connections in Nazi Germany," Economics Working Papers 1183, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Seema Jayachandran, 2004. "The Jeffords Effect," UCLA Economics Online Papers 297, UCLA Department of Economics.
  4. Timothy Frye & Andrei Shleifer, 1996. "The Invisible Hand and the Grabbing Hand," NBER Working Papers 5856, National Bureau of Economic Research, Inc.
  5. Brian Knight, 2004. "Are Policy Platforms Capitalized into Equity Prices? Evidence from the Bush/Gore 2000 Presidential Election," NBER Working Papers 10333, National Bureau of Economic Research, Inc.
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Cited by:
  1. Chen, Shimin & Sun, Zheng & Tang, Song & Wu, Donghui, 2011. "Government intervention and investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 259-271, April.

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