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Share reform and the performance of China�s listed companies

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The latest round of share reform in China, which began in 2005, sets two related processes in motion: it increases the tradable share proportion and signals the start of a decline in the government-owned share proportion. This paper considers the effect these processes might have on firm performance in the future by analysing the impact the above share proportions had on firm performance immediately prior to reform commencing. The government-owned share proportion is found to exert a linear and positive impact on firm performance. Further, it is revealed that this impact is best explained by the high ownership concentration of government shareholdings. The policy implication is that simply making all shares tradable need not lead to better firm performance. Rather, a more pertinent consideration is whether shareholdings become more or less diffuse, and this highlights the importance of non-government institutional investors playing a more prominent role than they currently do.

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File URL: http://www.uq.edu.au/economics/eaerg/dp/EAERG_DP10.pdf
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Paper provided by School of Economics, University of Queensland, Australia in its series EAERG Discussion Paper Series with number 1005.

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Handle: RePEc:qld:uqeaer:10

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  1. Wang, Changyun, 2005. "Ownership and operating performance of Chinese IPOs," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1835-1856, July.
  2. Paul McGuinness & Michael Ferguson, 2005. "The ownership structure of listed Chinese State-owned enterprises and its relation to corporate performance," Applied Financial Economics, Taylor & Francis Journals, vol. 15(4), pages 231-246.
  3. Bai, Chong-En & Liu, Qiao & Lu, Joe & Song, Frank M. & Zhang, Junxi, 2004. "Corporate governance and market valuation in China," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 599-616, December.
  4. Xiaozu Wang & Lixin Colin Xu & Tian Zhu, 2004. "State-owned enterprises going public "The case of China"," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 467-487, 09.
  5. Wei, Zuobao & Varela, Oscar, 2003. "State equity ownership and firm market performance: evidence from China's newly privatized firms," Global Finance Journal, Elsevier, vol. 14(1), pages 65-82, May.
  6. Sun, Qian & Tong, Wilson H. S., 2003. "China share issue privatization: the extent of its success," Journal of Financial Economics, Elsevier, vol. 70(2), pages 183-222, November.
  7. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
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Cited by:
  1. David Greenaway & Alessandra Guariglia & Zhihong Yu, . "The More the Better? Foreign Ownership and Corporate Performance in China," Discussion Papers 09/05, University of Nottingham, GEP.
  2. Gabe J. de Bondt & Tuomas A. Peltonen & Daniel Santabárbara, 2010. "Booms and busts in China's stock market: Estimates based on fundamentals," Banco de Espa�a Working Papers 1032, Banco de Espa�a.

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