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State Shareholding and the Value of China's Firms

Examining the ultimate ownership and control of 826 corporations listed on China's stock market, this paper argues that the government shareholder in control is the main feature of these Chinese firms. With the panel dataset of five years, it was found that firms under the control of the government shareholder are valued lower than the comparable firms under the control of a non-government shareholder, but the continuous relationship between state shareholding and corporate value is non-monotonic. Corporate value is lower with a larger stake of government ownership when the government is a small shareholder, but it increases with increased state shareholding when the government is a large shareholder. This paper interprets it with the grabbing and helping hands of the government shareholder. Key words: ownership structure, government shareholding, corporate governance.