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Ownership structure, corporate governance and productive efficiency in China

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  • Dongwei Su

    ()

  • Xingxing He

    ()

Abstract

This paper investigates whether and to what extent ownership structure and corporate governance affect productive efficiency in a sample of 744 publicly listed manufacturing firms in China between 1999 and 2006. The paper finds that firm efficiency, as estimated using stochastic frontier analysis and data envelopment analysis, is negatively related to state ownership while positively related to public and employee share ownership. In addition, the relationship between ownership concentration and firm efficiency is U-shaped, indicating that the largest shareholder may engage in tunneling activities. As the identity of the largest shareholder changes from government, government-controlled legal entity to other types of legal entity, firm efficiency significantly improves. These results provide strong evidence that political interferences have reduced firm efficiency. Moreover, firms with more independent board are more efficient, supporting the argument that board of directors can be an effective internal governance mechanism. Furthermore, provincial market development, a proxy for the strength of external governance mechanism, is positively related to firm efficiency. Overall, the findings illustrate that restructuring state-owned enterprises via improvements in corporate governance has enhanced firm efficiency, but partial privatization without transfer of ownership and control from the state to the public remains a major source of inefficiency in corporate China. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Dongwei Su & Xingxing He, 2012. "Ownership structure, corporate governance and productive efficiency in China," Journal of Productivity Analysis, Springer, vol. 38(3), pages 303-318, December.
  • Handle: RePEc:kap:jproda:v:38:y:2012:i:3:p:303-318
    DOI: 10.1007/s11123-011-0257-8
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    Cited by:

    1. Claudia Curi & Justas Gedvilas & Ana Lozano-Vivas, 2016. "Corporate Governance of SOEs and performance in transition countries. Evidence from Lithuania," BEMPS - Bozen Economics & Management Paper Series BEMPS36, Faculty of Economics and Management at the Free University of Bozen.
    2. repec:rbs:ijbrss:v:6:y:2017:i:1:p:89-105 is not listed on IDEAS
    3. World Bank, 2015. "Governance Reforms of State-Owned Enterprises," World Bank Other Operational Studies 22749, The World Bank.
    4. Neil Foster-McGregor & Johannes Pöschl & Ana Rincon-Aznar & Robert Stehrer & Michaela Vecchi & Francesco Venturini, 2014. "Reducing Productivity and Efficiency Gaps: the Role of Knowledge Assets, Absorptive Capacity and Institutions," wiiw Research Reports 396, The Vienna Institute for International Economic Studies, wiiw.
    5. repec:eee:enepol:v:123:y:2018:i:c:p:349-359 is not listed on IDEAS
    6. repec:kap:jproda:v:50:y:2018:i:1:d:10.1007_s11123-018-0532-z is not listed on IDEAS
    7. repec:eee:proeco:v:203:y:2018:i:c:p:134-153 is not listed on IDEAS

    More about this item

    Keywords

    Corporate governance; Ownership structure; Firm efficiency; Stochastic frontier analysis; Data envelopment analysis; D24; G30; P31;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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