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Share reform and the performance of China�s listed companies

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Abstract

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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  • James Laurenceson & Bing Bing Jiang & Kam Ki Tang, "undated". "Share reform and the performance of China�s listed companies," EAERG Discussion Paper Series 1005, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqeaer:10
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    File URL: http://www.uq.edu.au/economics/eaerg/dp/EAERG_DP10.pdf
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    2. Venancio Tauringana & Ishmael Tingbani & Godwin Okafor & Widin B. Sha'ven, 2021. "Terrorism and global business performance," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5636-5658, October.
    3. Gabe J. de Bondt & Tuomas A. Peltonen & Daniel Santabárbara, 2010. "Booms and busts in China's stock market: Estimates based on fundamentals," Working Papers 1032, Banco de España.
    4. Zia-ur-Rehman Rao & Muhammad Zubair Tauni & Tanveer Ahsan & Muhammad Umar, 2020. "Do mutual funds have consistency in their performance?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 19(2), pages 139-153, May.
    5. Liang Guo & Ya Dai & Donald Lien, 2016. "The effects of China’s split-share reform on firms’ capital structure choice," Applied Economics, Taylor & Francis Journals, vol. 48(27), pages 2530-2549, June.

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