Classified Reform of State-Owned Enterprises' Mixed-Ownership and Capital Allocation Efficiency

Abstract

Abstract: The classified reform of the mixed ownership is one of the important reform strategies in China's state-owned enterprises. Taking the state-owned listing companies during the period of 2003-2018 as research objectives, this paper empirically tests the impact of the classified reform of mixed-ownership on capital allocation efficiency. The results show that, in the“fully competitive”state-owned enterprises (SOEs), the mixed equity restriction can significantly restrain over-investment and improve capital allocation efficiency, while in the SOEs belonging to the“important industry category”, this effect is not significant. The results of further study show that in the state-owned enterprises in the“fully competitive category”, compared with the shareholders of other nature, private shareholders can play a more significant role in the restriction of over-investment, and can better improve capital allocation efficiency. Compared with SOEs in the“resource monopoly category”, the mixed equity restriction of SOEs in the“general competitive category”can significantly restrain over-investment and improve capital allocation efficiency.

Key words: classified reform of mixed-ownership, mixed equity restriction ratio, capital allocation efficiency

JIANG Xuhan. Classified Reform of State-Owned Enterprises' Mixed-Ownership and Capital Allocation Efficiency[J]. JOURNAL OF CONTEMPORARY FINANCE AND ECONOMICS, 2022, 0(2): 143-154.

References

[1] Billett M.T., Garfinkel J. A., Jiang Y. The Influence of Governance on Investment: Evidence from a Hazard Model[J]. Journal of Financial Economics, 2011, 102(3): 643-670.
[2] Cao C.F., Ma L. F., Shen X. X. Fiscal Pressure, Promotion Pressure, Tenure of Office and Local State-owned Companies'Overinvestment[J]. China Economic Quarterly, 2014, (4): 1415-1436.
[3] Chen J.L., Tang J. J. The Mixed Ownership Classification Reform of the State-owned Enterprises and the Optimal Proportion of State-owned Shares: Based on the Duopoly Model[J]. Journal of Guangdong University of Finance & Economics, 2016, (1): 36-44.
[4] Chen S., Sun Z., Tang S.Government Intervention and Investment Efficiency: Evidence from China[J]. Journal of Corporate Finance, 2011, 17(2): 259-271.
[5] China's Macroeconomic Analysis and Forecasting Group. New Reforming Ideas of New State-Owned Enterprises in the New Era--The Logic, Path and Implementation of the Classification and Reform of State-owned Enterprises[J]. Economic Theory and Business Management, 2017, (5): 5-24.
[6] D'Souza J., Megginson W. L., Nash R. Effect of Institutional and Characteristics on in the Firm-Specific Post-Privatization Performance: Evidence from Developed Pressure to the Countries[J]. Journal of Corporate Finance, 2005, 11(5): 747-766.
[7] Djankov S., Murrel P.Enterprise Restructuring in Transition: A Quantitative Survey[J]. Journal of Economic Literature, 2002, 40(3): 739-792.
[8] Fan J.P. H., Wong J. T., Zhang T. Politically Connected CEOs, Corporate Governance and Post-IPO Performance of China's Newly Partially Privatized Firms[J]. Journal of Financial Economics, 2007, 84(2): 330-357.
[9] Hong M., Zhang T., Zhang K.X. Corporate Social Responsibility Information Disclosure and Capital Allocation Efficiency: A Quasi-natural Experiment Based on Mandatory Information Disclosure[J]. Journal of Harbin University of Commerce(Social Science Edition, 2019, (4): 54-64.
[10] Hu Y.F., Song M., Zhang J. X. Does Privatization Work in China?[J]. Economic Research Journal, 2006, (7): 49-60.
[11] Huang Q.H., Yu J. The Reform and Governance of State-owned Economy Based on Classification Method[J]. China Industrial Economics, 2013, (11): 5-17.
[12] Lan X.W., Zhang L. Equity Balances, R&D Investment and Corporate Performance--from the GEM Experience Data[J]. Journal of Finance and Economics Theory, 2017, (2): 77-85.
[13] Li Q.Y. Accounting Information Quality and Capital Allocation Efficiency: Empirical Evidence of Chinese Listed Corporations[J]. Nankai Business Review, 2009, (2): 115-124.
[14] Li W.A., Jiang T. On Corporate Governance and Over-investment of Listed Companies in China[J]. Finance & Trade Economics, 2007, (12): 56-61.
[15] Li Y.H., Li Z., Tang S. L. Corporate Life-cycle, Corporate Governance and Corporate Capital Allocation Efficiency[J]. Nankai Business Review, 2011, (3): 110-121.
[16] Lin Y.F., Liu M. X., Zhang Q. Policy Burden and Enterprise's Soft Budgetary Binding: A Case Study from China[J]. Management World, 2004, (8): 81-89.
[17] Liu X.X. The Effects of Privatization on Industrial Performance in Chinese Economic Transition--Analysis of the 2001 National Industrial Census Data[J]. Economic Research Journal, 2004, (8): 16-26.
[18] Liu X.X. The Impact of the Structure of China's Industrial Enterprise's Ownership on Its Efficiency[J]. Economic Research Journal, 2000, (2): 17-25.
[19] Lu D., Sun Y., Yang D.Accounting Information and Resource Allocation: A literature Review[J]. Accounting Research, 2012, (6): 19-24.
[20] Lu Z.F., Han X., Chang Q. A Study of the Relationship between Companies' Running into Long-term Debt and Investing Behavior[J]. Management World, 2006, (1): 120-128.
[21] Ma L.F., Wang L. L., Zhang Q. Pecking Order of Mixed Ownership: The Logic of Market[J]. China Industrial Economics, 2015, (7): 5-20.
[22] Mao X.S. Mixed Ownership Reform of State-owned Enterprises: Current Situation and Theoretical Analysis[J]. Journal of Beijing Technology and Business University (Social Science Edition), 2020, (3): 21-28.
[23] Pan Y., Wang Y.G., Xu T. Social Capital, Government Intervention, and Regional Capital Allocation Efficiency: Evidence from the Provincial Industrial Data[J]. Journal of Audit & Economics, 2015, (5): 85-94.
[24] Qian X.S. A Study on Efficiency of Firm's Internal Capital Allocations--A General Equilibrium Approach Based on Financial Discrimination and Insider Control[J]. Accounting Research, 2013, (10): 43-50.
[25] Richardson S.Over-Investment of Free Cash Flow[J]. Review of Accounting Studies, 2006, 11(2/3): 159-189.
[26] Rousseau P.L., Xiao S. Change of Control and the Success of China's the Share-Issue Privatization[J]. The China Economic Review, 2008, 19(4): 605-613.
[27] Scharfstein D.S., Stein J. C. The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment[J]. Journal of Finance, 2000, 55(6): 2537-2564.
[28] Shleifer A.State Versus Private Ownership[J]. Journal of Economic Perspectives, 1998, 12(4): 133-150.
[29] Song L.G., Yao Y. Impacts of Restructuring on Firm Performance in China[J]. Social Sciences in China, 2005, (2): 17-32.
[30] Stiglitz J.The Economic Role of the State[M]. Translated by Zeng Q., He Z. X. Beijing: Spring and Autumn Publishing House, 1988.
[31] Tian L.H. Two Hands of the Government Shareholder and the U Curve between Government Shareholdings and Corporate Value[J]. Economic Research Journal, 2005, (10): 48-58.
[32] Wang X., Zhang M., Yu F.S. CEO Overconfidence and Distortion of Firms' Investments: Some Empirical Evidence from China[J]. Nankai Business Review, 2008, (2): 77-83.
[33] Wei X.H. Review of the Theory of Capital Efficiency & Industry Growth[J]. Economic Perspectives, 2008,(5):135.
[34] Wu W.Z., Zong D. W. Structure of Diversified Ownership with Higher Productivity: Evidence from 1998-2007 Industrial Firm Level Data[J]. Modern Finance & Economics, 2016, (3): 15-25.
[35] Xin Q.Q., Lin B., Wang Y. C. Government Control, Executive Compensation and Capital Investment[J]. Economic Research Journal, 2007, (8): 110-122.
[36] Yang H.Y., Tong L. On the Corporate Governance of State-owned Enterprises under Mixed Ownership Reform[J]. Macroeconomics, 2015, (1): 42-51.
[37] Yang X.Q., Yin X. Q. How does the Reform of State-Owned Enterprises Affect Company's Cash Holdings?[J]. Management World, 2018, (11): 93-107.
[38] Yang Z.Q., Shi S. P., Shi B. R., Cao X. Y. Mixed Ownership Structure, Equity Incentives and Managerial Entrenchment in Financing Decision-making: Evidence Based on Dynamic Trade-off Theory[J]. Journal of Finance and Economics, 2016, (8): 108-120.
[39] Zhang L.P., Yang X. Q. Managerial Power, Management Incentive and Over-Investment[J]. Soft Science, 2012, (10): 107-112.
[40] Zhang X.J., Guo L. H., Xu L. B. Research on the Mixed Ownership Reform of State Owned Enterprises and Enterprise Investment Efficiency--Based on the Control of Residual State Ownership and Political Connection[J]. Economic Management Journal, 2015, (9): 132-145.
[41] Zhang X.J., Guo L. Asset Injection, Rent Seeking Behavior of Large Shareholders and Capital Allocation Efficiency[J]. Journal of Financial Research, 2008, (2): 98-112.
[42] Zhang Y., Liu L.J., Yin Z. J. Characteristics of Ownership Structure and the Efficiency of Mixed Ownership Enterprises[J]. Accounting and Economics Research, 2019, (3): 92-107.
[43] Zhu C.H. The Effect of Investor Sentiment on the Listed Company's Investment[J]. Journal of Business Economics, 2009, (6): 60-67.