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An empirical examination of endogenous ownership in Chinese private enterprises

Author

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  • Zhong Qin
  • Vinod Mishra
  • Russell Smyth

Abstract

The relationship between ownership structure and firm performance in small and medium enterprises (SMEs) in developing and transition countries has been largely ignored. Drawing on endogenous ownership theory, this paper seeks to understand the relationship between ownership structure and firm performance in SMEs in China, which represents an embryonic market environment. Using survey data collected from 189 private firms in Shantou City, China, we find that ownership variables do not have a statistically significant relationship with firm performance. We examine the determinants of changing ownership shares and find that firm size and business instability are related to changes in ownership shares. Our findings provide empirical support for the central tenets of endogenous ownership theory. As such, the results can be interpreted as meaning that even in a developing market environment, such as China, market forces are strong enough to dominate ownership structure change or that the market mechanism is functioning well in some areas of emerging markets.

Suggested Citation

  • Zhong Qin & Vinod Mishra & Russell Smyth, 2016. "An empirical examination of endogenous ownership in Chinese private enterprises," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 21(4), pages 513-530, October.
    • Handle: RePEc:taf:rjapxx:v:21:y:2016:i:4:p:513-530
    DOI: 10.1080/13547860.2016.1160811
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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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