Government Control and Performance Criteria for Chinese Listed Corporations

Abstract

We investigate differences with respect to multiple performance criteria between Chinese listed corporations, depending on whether central government, provincial government or private interests control them. We estimate relations between controlling shareholder type and corporate performance in terms of profitability, employment intensity and effective tax rates during 2001-2008. We find corporations controlled by central or local governments report lower profits and have higher employment intensity, compared to privately-controlled corporations. Our results also suggest corporate income tax is strategically moderated for government-controlled corporations according to the financial prospects of corporations. These findings are consistent with arguments that financial performance measures do not adequately reflect the objectives of government-controlled corporations.

Keywords: Private ownership, Government ownership, Performance criteria, Effective tax rates, Employment intensity, China

JEL Classification: G32, G38, H25, P34