Macroeconomic Uncertainty, State Ownership, and Board Size in China

32 Pages Posted: 10 Feb 2016

See all articles by Jing Liao

Jing Liao

Massey University - School of Economics and Finance

Martin R. Young

Massey University - School of Economics and Finance

Date Written: October 31, 2015

Abstract

This paper examines the impacts of macroeconomic uncertainty, state ownership and board composition on firm performance. First, we find state ownership is negatively related to firm performance measured by return on assets and Tobin’s Q. However, Tobin’s Q increases with state ownership when firms face a higher level of macroeconomic uncertainty. The strong positive incremental effect of state ownership on Tobin’s Q is robust when controlling for possible endogeneity. Second, we add evidence to the negative relationship between board size and firm performance. But we further show that Tobin’s Q increases with board size when the level of macroeconomic uncertainty is high. Our results indicate that connections/resources provided by directors and through the ownership arrangement are valuable to cope with macroeconomic uncertainty.

Keywords: Board Size, State Ownership, Macroeconomic Uncertainty, Firm Performance, China

JEL Classification: G34, G20

Suggested Citation

Liao, Jing and Young, Martin R., Macroeconomic Uncertainty, State Ownership, and Board Size in China (October 31, 2015). Asian Finance Association (AsianFA) 2016 Conference. Available at SSRN: https://ssrn.com/abstract=2729508 or http://dx.doi.org/10.2139/ssrn.2729508

Jing Liao (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Martin R. Young

Massey University - School of Economics and Finance ( email )

Private Bag 11222
Palmerston North, 4442
New Zealand

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