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Ownership, institutions and firm value: cross-provincial evidence from China

Accepted version
Peer-reviewed

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Article

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Abstract

The distinctive political-economic setups of emerging economies engender special corporate governance issues that warrant added attention to the broader institutional environments. Using a unique provincial firm-level dataset, this paper investigates how corporate control natures, ownership concentration, and provincial differences in government quality and financial development jointly affect the value of Chinese listed companies. Firstly, central government control is generally associated with higher Tobin’s Q, while a negative premium is found for firms ultimately controlled by local governments. It then uses alternative concentration measures and an instrumental variable approach to confirm a nonlinear relationship between ownership concentration and Tobin’s Q, implying that firm value first decreases and then increases as blockholders own more shares. Further analysis reveals that government quality has a significant, positive moderating effect on the relationship between different corporate controllers and firm value, while the value implication of ownership concentration also depends on regional financial development.

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Keywords

corporate governance, firm value, government quality, financial development, corporate control, ownership concentration

Journal Title

Research in International Business and Finance

Conference Name

Journal ISSN

0275-5319

Volume Title

44

Publisher

Elsevier
Sponsorship
Economic and Social Research Council (ES/J012491/1)
Economic and Social Research Council’s “Law, Development and Finance in Rising Powers” research project (Grant ES/J012491/1). National Natural Science of Foundation of China (Grant 71272065).