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The Class of Shareholdings and its Impacts on Corporate Performance: a case of state shareholding composition in Chinese public corporations


  • Guy S. Liu

    (Department of Economics and Finance, Brunel University, Uxbridge, Middlesex UB8 3PH, UK.)

  • Pei Sun

    (Judge Institute of Management, University of Cambridge.)


Does the class of shareholdings matter for corporate performance? To answer the question, the paper starts by classifying shareholdings of Chinese publicly listed companies on the basis of the principle of ultimate ownership. A state-dominant shareholding structure is found, in that 81.6 per cent of companies are identified as ultimately controlled by the state. In contrast to our identified shareholdings, the Chinese official shareholding classification is ambiguous for the identification of ultimate controllers of public corporations, which in turn has misled many previous studies in assessing the impact of shareholding classes on performance. Based on our newly established shareholding classes, we undertake a nested performance comparison between these different classes and find significant evidence from the Chinese data that the class of shareholdings does matter for company performance. The least inefficient shareholding class is the holding companies that are wholly listed and have focused industrial business through the state indirect control of the downstream public corporations. This finding provides ground for us to think more about how the corporate control mechanism could be further improved in China's current corporate governance reform. Copyright Blackwell Publishing Ltd 2005.

Suggested Citation

  • Guy S. Liu & Pei Sun, 2005. "The Class of Shareholdings and its Impacts on Corporate Performance: a case of state shareholding composition in Chinese public corporations," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(1), pages 46-59, January.
  • Handle: RePEc:bla:corgov:v:13:y:2005:i:1:p:46-59

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    References listed on IDEAS

    1. Xiaonian Xu & Yan Wang, 1997. "Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies," Policy Research Working Paper Series 1794, The World Bank.
    2. Claessens, Constantijn A. & Djankov, Simeon & Joseph P. H. Fan & Lang, Larry H. P., 1998. "Diversification and efficiency of investment by East Asian corporations," Policy Research Working Paper Series 2033, The World Bank.
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    Cited by:

    1. Yi-Hua Lin & Jeng-Ren Chiou & Yenn-Ru Chen, 2010. "Ownership Structure and Dividend Preference," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(1), pages 56-74, January.
    2. 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).
    3. Chen, Alex A. & Cao, Hong & Zhang, Dayong & Dickinson, David G., 2013. "The impact of shareholding structure on firm investment: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 85-100.
    4. Kling, Gerhard & Weitzel, Utz, 2011. "The internationalization of Chinese companies: Firm characteristics, industry effects and corporate governance," Research in International Business and Finance, Elsevier, vol. 25(3), pages 357-372, September.
    5. Hu, Helen Wei & Cui, Lin, 2014. "Outward foreign direct investment of publicly listed firms from China: A corporate governance perspective," International Business Review, Elsevier, vol. 23(4), pages 750-760.
    6. Ho, Daniel & Lau, Alex & Young, Angus, 2012. "Enterprise ownership and control in China: Governance with a Chinese twist," Business Horizons, Elsevier, vol. 55(6), pages 575-582.
    7. Kato, Takao & Long, Cheryl, 2006. "CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 796-817, December.
    8. Kang, Young-Sam & Kim, Byung-Yeon, 2012. "Ownership structure and firm performance: Evidence from the Chinese corporate reform," China Economic Review, Elsevier, vol. 23(2), pages 471-481.
    9. Liu, Guy S. & Sun, Pei & Woo, Wing Thye, 2006. "The Political Economy of Chinese-Style Privatization: Motives and Constraints," World Development, Elsevier, vol. 34(12), pages 2016-2033, December.
    10. Xiaohua Yang & Yi Jiang & Rongping Kang & Yinbin Ke, 2009. "A comparative analysis of the internationalization of Chinese and Japanese firms," Asia Pacific Journal of Management, Springer, vol. 26(1), pages 141-162, March.
    11. Jan Hanousek & Evžen Kočenda, 2011. "Rozsah integrovaného státního vlastnictví a vliv firemní kontroly na výkonnost českých podniků
      [Extent of the Integrated State Ownership and Effect of the State Control on Performance of Czech Firm
      ," Politická ekonomie, University of Economics, Prague, vol. 2011(1), pages 82-104.
    12. Yi-Hua Lin & Jeng-Ren Chiou & Yenn-Ru Chen, 2010. "Ownership Structure and Dividend Preference," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(1), pages 56-74, January.
    13. Jia Liu & Dong Pang, 2009. "Financial factors and company investment decisions in transitional China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 91-108.
    14. K. Hung Chan & Phyllis L. L. Mo & Amy Y. Zhou & Steven Cahan, 2013. "Government ownership, corporate governance and tax aggressiveness: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(4), pages 1029-1051, December.
    15. Cui, Lin & Meyer, Klaus E. & Hu, Helen Wei, 2014. "What drives firms’ intent to seek strategic assets by foreign direct investment? A study of emerging economy firms," Journal of World Business, Elsevier, vol. 49(4), pages 488-501.
    16. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.
    17. Chang, Eric C. & Wong, Sonia M.L., 2009. "Governance with multiple objectives: Evidence from top executive turnover in China," Journal of Corporate Finance, Elsevier, vol. 15(2), pages 230-244, April.
    18. David Smith, 2012. "Guanxi, Mianzi, and Business : The Impact of Culture on Corporate Governance in China," World Bank Other Operational Studies 17094, The World Bank.
    19. Lee Shin-Ping & Chuang Tsung-Hsien, 2009. "The determinants of corporate performance: A viewpoint from insider ownership and institutional ownership," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(3), pages 233-247, March.
    20. Kang, Fei & Hauge, Janice A. & Lu, Ting-Jie, 2012. "Competition and mobile network investment in China’s telecommunications industry," Telecommunications Policy, Elsevier, vol. 36(10), pages 901-913.
    21. repec:kap:rqfnac:v:49:y:2017:i:4:d:10.1007_s11156-016-0612-y is not listed on IDEAS
    22. Huang, Wei & Wright, Brian, 2015. "Analyst earnings forecast under complex corporate ownership in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 69-84.

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