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Helping Hand or Grabbing Hand? Central vs. Local Government Shareholders in Chinese Listed Firms

29 Pages Posted: 18 Mar 2005 Last revised: 28 Jul 2009

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance

P. Raghavendra Rau

University of Cambridge

Aris Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2009

Abstract

We analyze related party transactions between Chinese publicly listed firms and their state-owned enterprise (SOEs) shareholders to examine whether companies benefit from the presence of government shareholders and politically connected directors appointed by the government. We find that minority shareholders seem to be expropriated in firms controlled by local government SOEs, firms with a large proportion of local government affiliated directors on their board, firms without directors affiliated with the central government, and firms in provinces where local government bureaucrats are less likely to be prosecuted for misappropriation of state funds. In contrast, firms controlled by the central government (or having directors affiliated with the central government on their boards) are benefited in their related party transactions with their central government SOEs.

Keywords: Law and finance, Government ownership, China, State-Owned Enterprises (SOE), Related party transactions, Political connections, Expropriation, Tunneling

JEL Classification: K42, G30

Suggested Citation

Cheung, Stephen Yan-Leung and Rau, P. Raghavendra and Stouraitis, Aris, Helping Hand or Grabbing Hand? Central vs. Local Government Shareholders in Chinese Listed Firms (July 1, 2009). Available at SSRN: https://ssrn.com/abstract=673283 or http://dx.doi.org/10.2139/ssrn.673283

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
+852 2788 7960 (Phone)
+852 2788 8806 (Fax)

P. Raghavendra Rau

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

Aristotelis Stouraitis (Contact Author)

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

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