Journal of Financial and Quantitative Analysis

Research Article

Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001

Zuobao Weia1, Feixue Xiea2 and Shaorong Zhanga3

a1 zwei@utep.edu, Department of Economics and Finance, University of Texas at El Paso, El Paso, TX 79968

a2 fxie@utep.edu, Department of Economics and Finance, University of Texas at El Paso, El Paso, TX 79968

a3 zhangs@marshall.edu, Division of Finance and Economics, Marshall University, Huntington, WV 25755.

Abstract

This paper investigates the relation between ownership structure and firm value across a sample of 5,284 firm years of China's partially privatized former state–owned enterprises (SOE) from 1991–2001. We find that state and institutional shares are significantly negatively related to Tobin's Q, and that significant convex relations exist between Q and state shares, as well as between Q and institutional shares. We also find that foreign ownership is significantly positively related to Tobin's Q. We test for potential endogeneity of ownership, and find that Q and state/foreign ownership are not jointly determined. We also test for time-series, industry, and geo-economic location effects, and find our results to be robust.

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