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Ownership, Institutions & Firm Value: Cross-Provincial Evidence from China

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  • Boya Wang

Abstract

The distinctive political-economic setups of emerging economies engender special corporate governance issues that warrant added attention to the broader institutional environments. Using a unique provincial firm-level dataset, we investigate how control natures, ownership concentration, and provincial differences in government quality and financial deregulation jointly affect the market value of Chinese listed companies. Firstly, the presence of a central government controller is generally associated with higher Tobin's Q, while a negative premium is found for firms ultimately controlled by local governments. We then use alternative concentration measures and an instrumental variable approach to confirm a nonlinear relationship between blockholder ownership and Tobin's Q, implying that firm value first decreases and then increases as blockholders own more shares. Further analysis reveals that government quality has a significant, positive moderating effect on the relationship between different control natures and firm value, while the valuation effect of ownership concentration also depends on regional financial development.

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  • Boya Wang, 2016. "Ownership, Institutions & Firm Value: Cross-Provincial Evidence from China," Working Papers wp484, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp484
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    Keywords

    Control natures; ownership concentration; government quality; financial development; firm value;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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