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Shareholding structure, depoliticization and firm performance

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  • Sonia M. L. Wong
  • Sonja Opper
  • Ruyin Hu

Abstract

In this study we use a dataset that provides information on Chinese Communist Party grassroots organizations' political control over decision-making in China's listed firms. Specifically, we examine how different types of shareholders affect (1) the party's level of decision-making power and (2) the implications of party control for firm performance. We obtain two major results. First, we find that the proportion of shares held by domestic individual shareholders is negatively related to the party's level of decision-making power. Second, we find that the existence of large institutional investors is associated with a reduced negative performance effect of party control. Our results suggest that both the exit and the voice channels may offer mechanisms for depoliticizing China's listed firms and improving their performance. This study both addresses an important corporate governance issue relevant to China's listed firms and offers interesting information in terms of comparative studies of corporate governance and reform strategies in transitional economies. Copyright (c) The European Bank for Reconstruction and Development, 2004.

Suggested Citation

  • Sonia M. L. Wong & Sonja Opper & Ruyin Hu, 2004. "Shareholding structure, depoliticization and firm performance," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 29-66, March.
  • Handle: RePEc:bla:etrans:v:12:y:2004:i:1:p:29-66
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    Cited by:

    1. William T. Allen & Han Shen, 2011. "Assessing China's Top-Down Securities Markets," NBER Working Papers 16713, National Bureau of Economic Research, Inc.
    2. Jianfeng Wu & Sali Li & Zijie Li, 2013. "The contingent value of CEO political connections: A study on IPO performance in China," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1087-1114, December.
    3. Chi, Wei & Wang, Yijiang, 2007. "Ownership, Performance and Executive Turnover," MPRA Paper 3545, University Library of Munich, Germany.
    4. Pessarossi, Pierre & Weill, Laurent, 2013. "Does CEO turnover matter in China? Evidence from the stock market," Journal of Economics and Business, Elsevier, vol. 70(C), pages 27-42.
    5. Chi, Wei & Wang, Yijiang, 2009. "Ownership, performance and executive turnover in China," Journal of Asian Economics, Elsevier, vol. 20(4), pages 465-478, September.
    6. William T. Allen & Han Shen, 2012. "Assessing China's Top-Down Securities Markets," NBER Chapters,in: Capitalizing China, pages 149-195 National Bureau of Economic Research, Inc.

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