Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001

• Published in: Journal of financial and quantitative analysis Vol. 40; no. 1; pp. 87 - 108
• Main Authors: Wei, Zuobao, Xie, Feixue, Zhang, Shaorong
• Format: Journal Article
• Language: English
• Published: New York, USA Cambridge University Press 01.03.2005; University of Washington School of Business Administration, University of Utah David Eccles School of Business, and New York University Leonard N. Stern School of Business
• Subjects: Business ownership; Business structures; China; Coefficients; Enterprises; Finance; Foreign ownership; Heavy industry; Investors; Issued capital; Organizational structure; Ownership; P values; Privatization; Quantitative analysis; Shareholders; Value; China
• ISSN: 0022-1090; 1756-6916
• DOI: 10.1017/S0022109000001757

This paper investigates the relation between ownership structure and firm value across a sample of 5,284 firm years of China's partially privatized former state–owned enterprises (SOE) from 1991–2001. We find that state and institutional shares are significantly negatively related to Tobin's Q, and that significant convex relations exist between Q and state shares, as well as between Q and institutional shares. We also find that foreign ownership is significantly positively related to Tobin's Q. We test for potential endogeneity of ownership, and find that Q and state/foreign ownership are not jointly determined. We also test for time-series, industry, and geo-economic location effects, and find our results to be robust.