Does Mixed Ownership Reform Make a Difference? - Empirical Evidence from Chinese Mixed-Ownership Enterprises


Student thesis: Doctoral Thesis

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Award date23 Dec 2021


For decades, Chinese state-owned enterprises (SOEs) have been able to rapidly focus their resources on major undertakings and improve social production capacity, thus contributing a lot to the development of China’s socialist market economy. While in the recent rise of non-public economics, Chinese SOEs have encountered a bottleneck and have lost major attraction because the rigid personnel mechanism and management system makes them difficult to achieve greater success. As Chinese SOEs are dominated by state power and political control, it is of great practical significance for China to stimulate the performance of less efficient SOEs and prevent the loss of state capital. Since the implementation of the Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform in 2013, China’s mixed ownership reform has accelerated the facilitation of the mutual development of various kinds of ownership economy, and more legislation, policy encouragement and institutional support have been promulgated to continuously deepen SOE reform and play on the advantages of socialism.

Although classical theories and foreign privatisation experiences provide some support for the view that implementing mixed ownership reform in China can—to some extent—improve the performance of inefficient mixed-ownership enterprises (MOEs), some scholars believe that the reform cannot fundamentally change the institutional environment because substantial state control and party intervention still prevail among Chinese MOEs. However, debate over the effectiveness of mixed ownership reform requires more empirical evidence. In view of such gaps in the literature, by reviewing the public announcements and financial indicators of Chinese MOEs, this thesis empirically tests whether the mixed ownership reform can promote the transformation of the corporate governance structure and firm performance of the reformed entities, so as to investigate if the integration of various ownership economy will produce synergy effect or antagonistic effect.

By use of textual analysis techniques - text mining, categorising and manually coding – to review millions of public announcements of all Chinese listed companies, this thesis collects 140 samples of reformed entities that have actually implemented the mixed ownership reform. It has been found that China’s mixed ownership reform is primarily carried out by introducing strategic investors, central-local mixed ownership reform, listing, employee stock ownership plan, debt-to-equity swap and public-private partnership. To evaluate and analyse reform effectiveness, this thesis adopts both a qualitative and quantitative approach (i.e. a case study and a time-varying difference-in-differences approach, respectively). The case study method shows that most reformed entities have tried to diversify their concentrated ownership structure and mix with different ownership entities. However, the corporate governance structure of reformed entities has not changed significantly as the state shareholders continue to dominate as a whole. The empirical findings of the time-varying difference-in-differences approach and propensity score matching difference-in-differences approach both suggest that implementing the mixed ownership reform has a significantly negative impact on the firm performance of the reformed entities. This is mainly because the reform just changes in form but not in substance, and the conflict between the new and the old shareholder lowers the efficiency of the reformed entities. The reform has also introduced challenges to the reformed entities, such as the enhanced party leadership and state control over corporate decisions and suspension of the reform.

In general, China’s mixed ownership reform has achieved initial success because the basic mechanism has been preliminarily established. But in the long run, further efforts are required to deepen the SOE reform. Rome is not built in a day, and reform is usually a tough and protracted process that requires patience, persistence and tolerance of fault and initial failure.

    Research areas

  • mixed ownership reform, state-owned enterprise, mixed-ownership enterprise, corporate governance, firm performance, qualitative and quantitative approaches