Corporate Governance, Valuation and Ownership in China: An Empirical Study of Listed Firms

The Chinese economy has undergone substantial and fundamental transformation as reforms are effected and the state monopoly is exchanged for more market oriented ownership structures. This research paper contributes to the ongoing body of work relating to corporate governance in China. The study investigates whether ownership changes, concentration or structure have significant influence on the performance of listed firms in China. The findings suggest that the market considers changes in ownership favourably, especially if the changes reduce state holdings. The market views the subsequent reduction in the influence of the state on enterprises in China positively. This then implies that legal person, tradable A or foreign holdings are considered superior to state ownership. It follows then that the structure of shareholdings is of importance and empirical evidence supports the notion. It is apparent that the function of legal persons is more highly regarded in the process of corporate governance in the market in China, as legal person blockholdings are found to be positively correlated with firm performance. Nevertheless, the study finds that ownership concentration per se, does not have explanatory power in relation to firm performance. Size is also found to be negatively correlated with performance, suggesting that the market identifies the unwieldy size of many of the large listed SOEs to be a hindrance to performance.