Does Corporate Ownership matter for Firm Performance? Evidence from Chinese Stock Exchanges

Authors

  • Dilesha Nawadali Rathnayake Dongbei University Finance and Economics
  • Diby Francois Kassi Dongbei University of Finance & Economics
  • Pierre Axel Louembé Dongbei University of Finance & Economics
  • Gang Sun Dongbei University of Finance & Economics
  • Ding Ning Dongbei University of Finance & Economics

Abstract

This paper examines the impact of corporate ownership structure and ownership concentration on the corporate performance of listed firms in China. Ordinary Least Square (OLS) and Two-Stages Least Squares (2SLS) models are used to capture the relationship between the independent variables and firm performance by considering the possible endogeneity of both performance and ownership variables. The ownership structure variables (executive shares, State shares, legal shares, and Negotiable A-shares) are negatively related with firm performance measured by Tobin's Q ratio. The proportion of state-owned shares and negotiable A-shares are significantly correlated with the firm profitability. Second, the results show that Chinese firm ownership is severely concentrated. The top ten largest shareholders accounted for 60% of the outstanding shares in 2017 and had a strong positive relationship with firm performance. In contrast, the largest shareholder's ownership concentration ratio variable has a significant negative relationship with the firm performance.

Keywords: Ownership structure, Ownership concentration, firm performance, China, Endogeneity

JEL Classifications: G1, G10, G18, G32

DOI: https://doi.org/10.32479/ijefi.7336

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Author Biographies

Dilesha Nawadali Rathnayake, Dongbei University Finance and Economics

School of Finance

Diby Francois Kassi, Dongbei University of Finance & Economics

School of Finance

Pierre Axel Louembé, Dongbei University of Finance & Economics

School of Accounting

Gang Sun, Dongbei University of Finance & Economics

School of Finance

Ding Ning, Dongbei University of Finance & Economics

School of Finance

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Published

2019-01-12

How to Cite

Rathnayake, D. N., Kassi, D. F., Louembé, P. A., Sun, G., & Ning, D. (2019). Does Corporate Ownership matter for Firm Performance? Evidence from Chinese Stock Exchanges. International Journal of Economics and Financial Issues, 9(1), 96–107. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/7336

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