Research On The Governance Effect Of Non-controlling State Ownership

Over the past 40 years of reform and opening up,the private economy has become an important part of China’s socialist market economic system and an important force to promote the development of socialist market economy.The private economy has played an important role in achieving rapid economic growth,ensuring employment and promoting technological innovation.However,the development of private economy still faces many internal and external obstacles.On the one hand,the problems of difficult and expensive financing,market access and tax burden have always restricted the private economy;On the other hand,the extensive development of private enterprises in the stage of high economic growth leads to disorderly expansion,excessive debt,and non-compliance and legal problems in credit and quality,which have a great negative impact on the private economy.In the period of economic transformation,how to better promote the transformation of private economy from high-speed development stage to high-quality development stage has become a key topic concerned by all walks of life.Since the Third Plenary Session of the 18 th CPC Central Committee proposed to “actively develop the mixed-ownership economy”,the mixed-ownership reform has become the key content of the reform of state-owned enterprises.In fact,the ownership structure of mixed-ownership is not only for state-owned enterprises,but also a form of mixed-ownership in private enterprises,The “Opinions of the State Council on the Development of Mixed-Ownership Economy by State-owned Enterprises” clearly states that “encourage state-owned capital to take shares in non-state-owned enterprises,strategic cooperation and resource integration with non-state-owned enterprises,and develop mixed-ownership economy”.Different from the mixed-ownership reform of state-owned enterprises,which has been widely recognized,the controversy that state ownership participation in private enterprises involves “the state advances and the private sector retreats” has been questioned.Therefore,whether private enterprises need to develop mixed-ownership economy and how to equity arrangement is an urgent topic to be confirmed.Ownership structure is the core institutional arrangement of enterprises,which has a significant impact on the level of corporate governance.Mixed-ownership structure is an important modern corporate governance mechanism.On the one hand,it is easier for different types of equity to coexist in the same enterprise to form effective equity balance,which can inhibit the tunneling behavior of controlling shareholders to a certain extent and effectively supervise the management;On the other hand,state ownership and private ownership can complement each other in terms of resource advantages.State ownership is easier to obtain financial resources and policy support because it has closer ties with the government,while private ownership is more able to capture business opportunities because it is highly sensitive to the market and has high business flexibility.The existing studies on the form of mixed-ownership of private enterprises mostly analyze it from the perspective of the resource effect of non-controlling state ownership.It is considered that state ownership is a political connection mechanism at the institutional level,which is more direct and effective than the superficial political connection formed by private entrepreneurs’ participation in politics.It forms a “symbiotic relationship” between enterprises and the government,it can play the role of reputation guarantee for enterprises,transmit the signal of enterprise strength to the outside world,reduce the information asymmetry with the outside world,and provide an invisible government guarantee for enterprises,which can help enterprises obtain more development opportunities and credit resources.However,few articles examine the impact of non-controlling state ownership on the governance level of private enterprises.According to the shareholder relationship theory,the cooperation and conflict between shareholders will directly affect the future decision-making and development of enterprises.From the perspective of cooperation,state ownership can bring scarce resources to private enterprises;from the perspective of conflict,the difference of interests among shareholders can form equity balance and improve the level of corporate governance.Therefore,it is necessary to comprehensively analyze the governance effect of non-controlling state ownership on private enterprises.Investment is an important driving force for realizing industrialization and sustained and rapid economic growth.Through the research on the impact of investment behavior,we can better understand the governance effect of non-controlling state ownership.Therefore,this paper selects the three most important measures of enterprise investment: innovation level,enterprise M&A and investment efficiency as the research perspective.Based on enterprise ownership theory,principal-agent theory,information asymmetry theory,resource-based theory and equity balance theory,this paper makes a theoretical analysis and empirical test on the mechanism of the governance effect of non-controlling state ownership affecting enterprise investment behavior.Taking China’s A-share private listed companies from 2007 to 2018 as the research sample,this paper empirically tests the impact of non-controlling state ownership on enterprise innovation level,enterprise M&A and investment efficiency.The main conclusions are as follows:First,from the perspective of innovation level,non-controlling state ownership can significantly improve the innovation level of private enterprises,and this improvement is mainly concentrated in invention patent applications,and has no significant impact on non-invention patents.Heterogeneity analysis shows that the above effects are more significant in high-tech industries,enterprises with higher state ownership level and enterprises from private enterprises.It is further found that non-controlling state ownership not only improves R&D investment,but also significantly improves the innovation efficiency of invention patents.Investigating the mechanism of action found that: on the one hand,the resource effect brought by non-controlling state ownership can improve the risk-taking ability of enterprises and make enterprises dare to invest in innovation;On the other hand,non-controlling state ownership can bring industry experience and industry resources to current enterprises by investing in other enterprises in the same industry,which is conducive to the improvement of enterprise innovation ability.Second,from the perspective of enterprise M&A,non-controlling state ownership can significantly reduce the number of M&A of private enterprises and improve the M&A performance of selected M&A projects.This effect is more significant in samples with higher levels of state ownership,samples from private enterprises,and samples with a high degree of marketization.In further research,through analysis of its mechanism of action,it is found that non-controlling state ownership can play the role of equity balance to inhibit related M&A and unrelated diversified M&A,and promote enterprises to obtain more resources support in the M&A activities,and ultimately improve the M&A performance of private enterprises.In addition,with the increase of the proportion of non-controlling state ownership,M&A performance shows an inverted “U”-shaped relationship,which first increases and then decreases.Third,from the perspective of investment efficiency,non-controlling state ownership can significantly reduce under-investment and over-investment,and improve the investment efficiency of private enterprises as a whole.Heterogeneity analysis shows that in the samples of state ownership level classification and government intervention classification,the above effects were more significant in the high-level and weak government intervention;In the samples classified by the origin of private enterprises,there is no significant difference for under-investment,but more significant for over-investment in the origin of private enterprises.In further research,through analysis of its mechanism of action,it is found that the credit resources and industry barrier resources brought by non-controlling state ownership can alleviate the under-investment of private enterprises,and at the same time reduce over-investment by reducing the agency problems of controlling shareholders and management;In addition,with the increase in the proportion of non-controlling state ownership holdings,under-investment did not show a“U”-shaped relationship,while over-investment showed a “U”-shaped relationship that first decreased and then increased.On the whole,the contribution and innovation of this paper are reflected in the following four aspects:First,it constructs the analysis framework of the governance effect of mixed ownership structure of private enterprises.This paper integrates enterprise ownership theory,principal-agent theory,information asymmetry theory and resource-based theory,systematically analyzes the mechanism of the governance effect of mixed-ownership structure of private enterprises,and investigates how this governance effect affects enterprise investment behavior.Most of the existing studies treat state-owned equity in private enterprises as a political connection mechanism(Song Zengji et al.,2014),ignoring its governance role as heterogeneous shareholders.This paper unifies the resource role and governance role played by non-controlling state ownership as a governance effect,not only theoretically analyzes the mechanism of governance effect,but also empirically proves the existence and influence path of governance effect.Second,this paper extends the research on the economic consequences of mixed ownership structure.Most of the existing studies on mixed-ownership structure are aimed at the mixed-ownership reform of state-owned enterprises,and discuss it from the aspects of enterprise performance,cash holding,M&A efficiency,enterprise innovation and investment efficiency(MA Lianfu et al.,2015;Yang Xingquan and Yin Xingqiang,2018;Lu Dong et al.,2019;Chen Lin et al.,2019;Ren Guangqian et al.,2020).Few literatures on the mixed-ownership structure of private enterprises examine the impact on financing constraints,enterprise performance and innovation investment(Song Zengji et al.,2014;Chen Jianlin,2015;Hao Yang and Gong Liutang,2017;Luo Hong and Qin Jidong,2019).Based on the existing research,this paper systematically pays attention to the impact of mixed-ownership structure of private enterprises on three important investment behaviors: enterprise innovation level,enterprise M&A and investment efficiency,which will help us to have a more comprehensive understanding of the governance effect and economic consequences of mixed-ownership structure.Third,this paper enriches the research on the influencing factors and influencing paths of enterprise investment behavior.Based on the special institutional background of China in the period of economic transformation,this paper investigates the impact of mixed-ownership structure of private enterprises on enterprise investment behavior,and provides empirical evidence for the impact of special ownership structure on enterprise investment behavior.In terms of impact path,according to the innovation level,this paper analyzes the impact on innovation output from the industry connection of state ownership for the first time,and believes that the industry connection formed by investing in multiple companies in the same industry can bring industry experience and technology to private enterprises,which is a useful supplement to uncover the transformation mechanism from innovation input to innovation output;For enterprise M&A,it is considered that the governance role of state ownership can reduce related M&A and unrelated diversified M&A,and reduce the number of M&A as a whole;For investment efficiency,it is considered that the governance role of state ownership can alleviate the over-investment of enterprises.Through path analysis,we can more comprehensively understand the rationality of the mixed-ownership structure of private enterprises affecting investment behavior.Fourth,the research conclusion of this paper has important policy guiding significance.In recent years,although the government has repeatedly advocated assisting the development of private enterprises in many aspects,the resources are limited,and it will take a long time to establish a reasonable and fair system.At this time,the state ownership chooses some key private enterprises to participate in shares,which can not only bring the resources needed for the development of private enterprises,but also improve the corporate governance level of enterprises,at the same time expand the influence of state-owned capital and realize the preservation and appreciation of state-owned capital.This paper proves that state-owned capital participation in private enterprises is a win-win choice from the perspective of investment.In view of this,relevant government agencies can issue corresponding policies to actively guide the mixed ownership reform of private enterprises,but the shareholding ratio of state ownership should be controlled within a certain range to avoid excessive political intervention in enterprises and maintain the final decision-making power of private controlling shareholders on business management.There are also significant differences in the resources behind different types of state ownership,which should be distinguished when formulating policies and norms.The low-level state ownership is mainly investment profit,and the high-level state ownership is mainly to support development and improve influence.In addition,in order to realize the mutual balance and complementary advantages of heterogeneous shareholders,state-owned shareholders should send directors to the board of directors as much as possible,so as to give better play to the advantages of state ownership and promote the development of private enterprises.