Does Group Affiliation Improve Firm Performance? The Case of Chinese State-Owned Firms

Abstract

This paper examines, for a sample of 657 state-owned Chinese firms in 2005, whether group affiliation improves performance. By using a simple OLS regression, as well as propensity score matching, treatment effects and two-step instrumental variable methods, we find a robust positive effect of group affiliation, which suggests that state-owned firms in China may benefit from joining a business group.

Keywords: China, Business groups, Evaluation methods, propensity score matching, treatment effects

JEL Classification: G34