Ownership and Political Control: Evidence from Charter Amendments
49 Pages Posted: 31 Jul 2019 Last revised: 31 Oct 2019
Date Written: July 22, 2019
The latest debate about Chinese state owned enterprises (SOEs) revolves around whether there is a positive association between ownership and control, or whether all firms in China are similarly captured by the government. The recent Chinese Communist Party (Party)’s policy mandating all SOEs to amend their corporate charters to enhance the Party’s control has provided us with a rare opportunity to empirically investigate this question. We find that the state’s equity interest is positively correlated with an SOE’s responsiveness to the Party’s mandate, while the concentration level of nonstate owners and overseas listing are inversely related. These results show that ownership is important for the Party to exercise control over SOEs, but the Party also faces external constraints from other nonstate owners and overseas regulators and investors.
Keywords: ownership, cross-listing, charter amendment, party building, communist party
JEL Classification: K22
Suggested Citation: Suggested Citation