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An Empirical Examination of Endogenous Ownership in Chinese Private Enterprises

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  • Zhong Qin
  • Vinod Mishra
  • Russell Smyth

Abstract

There is debate over the relationship between ownership structure and firm performance. Most existing studies look at established listed companies in developed countries, in which the market mechanism is well developed. Meanwhile, the relationship between ownership structure and firm performance in small and medium enterprises (SMEs) in transition countries has been largely ignored. Drawing on endogenous ownership theory, this paper explores the impact of ownership structure on firm performance in SMEs in the context of an embryonic market environment. Using survey data for 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 support the central tenets of endogenous ownership theory and reveal factors that may lead to the change of ownership structure among SMEs in an emerging market.

Suggested Citation

  • Zhong Qin & Vinod Mishra & Russell Smyth, 2012. "An Empirical Examination of Endogenous Ownership in Chinese Private Enterprises," Monash Economics Working Papers 38-12, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2012-38
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2012/3812empiricalqinmishrasmyth.pdf
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    References listed on IDEAS

    as
    1. Luigi Zingales, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1047-1073.
    2. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    3. Xiaonian Xu & Yan Wang, 1997. "Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies," Policy Research Working Paper Series 1794, The World Bank.
    4. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    5. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
    6. Barth, Erling & Gulbrandsen, Trygve & Schonea, Pal, 2005. "Family ownership and productivity: the role of owner-management," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 107-127, March.
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    More about this item

    Keywords

    ownership structure; endogenous ownership; corporate governance; firm performance; SMEs; private enterprises in China;

    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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