A Study On Performance Influence Of Corporate Control Transfer Under Chinese Typical Decentralization

The role of local government intervention on control transfer under thebackground of Chinese decentralization reform is not fully made clear in existingliteratures. Based on the data set consisting of135target listed companies, whichcontrol right are transferred in Shenzhen Stock Exchange or Shanghai StockExchange from2006to2008, this paper shows empirical evidences on how localgovernment intervention affects corporate performance after control transfer undercircumstance of Chinese typical decentralization. Results show that corporateperformance, compare to1year before control transfer，is significantly improved over3years after it. But higher local government intervention in the year of controltransfer makes improving performance less significant. And local governmentintervention can also alleviate corporate earning management in control transfer,affecting performance change over1year after control transfer compare to1yearbefore it. More importantly, local government intervention under Chinesedecentralization can lower control transfer performance in a long time after it whilethe degree of earning management only can improve control transfer performance inquite a short time. This means local government intervention has negative effect inimproving corporate performance after control transfer. What is more, the effect oflocal government intervention will still remain when studying performance change ina longer time after control transfer. The function of lowering control transferperformance is more likely due to excessive government intervention which inhibitnormal function of control right market not only because alleviating earningmanagement behavior in the process of control transfer. Accordingly, lowering themotive of local government intervention on economy is the important prerequisite formarket of control transfer to function effectively.