Shareholding Structure, Depoliticization and Firm Performance

38 Pages Posted: 15 Apr 2004

See all articles by Sonia M. L. Wong

Sonia M. L. Wong

University of Hong Kong

Sonja Opper

Lund University - Department of Economics

Ruyin Hu

Shanghai Stock Exchange

Abstract

In this study, we use a dataset that provides information on Chinese Communist Party grassroots organizations' political control over decision-making in China's listed firms. Specifically, we examine how different types of shareholders affect (1) the party's level of decision-making power and (2) the implications of party control for firm performance. We obtain two major results. First, we find that the proportion of shares held by domestic individual shareholders is negatively related to the party's level of decision-making power. Second, we find that the existence of large institutional investors is associated with a reduced negative performance effect of party control. Our results suggest that both the exit and the voice channels may offer mechanisms for depoliticizing China's listed firms and improving their performance. This study both addresses an important corporate governance issue relevant to China's listed firms and offers interesting information in terms of comparative studies of corporate governance and reform strategies in transitional economies.

Suggested Citation

Wong, Sonia M. L. and Opper, Sonja and Hu, Ruyin, Shareholding Structure, Depoliticization and Firm Performance. Available at SSRN: https://ssrn.com/abstract=513519

Sonia M. L. Wong (Contact Author)

University of Hong Kong ( email )

1021, KKL Building
Pokfulam Road
Hong Kong
China

Sonja Opper

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden
+46 046-2227906 (Phone)
+46 046-2224118 (Fax)

Ruyin Hu

Shanghai Stock Exchange

Shanghai 200120
China

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