Kill Two Birds With One Stone? China's Mixed Ownership Reform and Investment Efficiency

The reform of state‐owned enterprises (SOEs) is a major strategic step for the central government to implement the policy of strengthening and expanding SOEs and an important measure to support the development of the nonpublic economy. This has become the main direction of China's current reform and the focus of its governance. Mixed ownership reform is the key implementation path and main direction of SOE reform. Its fundamental purpose is to stimulate the vitality and competitiveness of these enterprises. Taking the sample of Chinese A‐share‐listed firms from 2004 to 2022, we aimed to explore the impact and mechanism of the mixed ownership reform of SOEs on the investment efficiency of SOEs and participating private enterprises (PEs). We found that the SOEs' mixed ownership reform provides a win–win situation for both SOEs and PEs. Specifically, the incorporation of non–state‐owned capital owed by PEs prevents SOEs' overinvestment, which is denoted as the “direct effect.” Meanwhile, PEs' participation in the reform leads to a reduction in underinvestment, which is denoted as the “indirect effect.” Mechanism analysis indicated that for SOEs, the reform leads to a decreased level of government intervention and a reduced principal agency cost, showing the reform's “governance effect.” For PEs, participation in the reform leads to reduced financing constraints, demonstrating the reform's “resource effect.” This study not only enriches the relevant research on the consequences of mixed ownership reform at the microlevel but also provides valuable experience and reference for the economic reform of emerging markets and developing countries.