Governance role of different types of state-share holders: Evidence from China's listed companies

This thesis extends the literature on the role of state ownership by distinguishing the governance roles of two types of state-share holders in China's listed companies. Government agencies that act as state-share holders (“GA shareholders”) are detrimental to firm value according to both the political and managerial perspectives. Non-government agencies such as SOEs and other forms of market-oriented economic entities acting as state-share holders (“corporate state-share holders ”) may not be detrimental to firm value because their goals are different from those of GA shareholders. The empirical findings are consistent with the predictions. Firms with GA shareholders perform significantly worse than other types of firms. Additionally, top management turnover is less sensitive to poor firm performance in firms with GA shareholders than in other types of firms. In contrast, there is no significant difference in performance between firms with corporate state-share holders and firms without state-owned shares. Moreover, the top management turnover in firms with corporate state-share holders is not more sensitive to poor firm performance than it is in firms without state-owned shares. The results suggest that it is the incentive of state-share holders, rather than state ownership per se, that is crucial in corporate governance for transitional economies.