The Restructuring of Ownership and Governance in China: An Empirical Study of the Shareholding Reform

Yi-min Lin ; Tian Zhu

Assistant Professor, Division of Social Science, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong y.lin@ust.hk
Assistant Professor, Division of Social Science, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong, Tel: +852- 2358-7834, Fax: +852-2335-0014 sotimzhu@ust.hk

JEL Classification: P21, P31, D23

Abstract

Using a firm-level survey data set, we examine the factors that have shaped the restructuring of ownership and governance among China's state-owned enterprises (SOEs) in its recent shareholding reform. We find that the pace and form of the restructuring are influenced by path-dependent variations in the transaction cost of finding the “right price” for re-arranging property rights. While the shareholding reform has brought about some substantive changes, we also find significant government involvement in the ownership and governance of restructured enterprises, which we view as a transitional phenomenon rather than as a failure of the reform. We argue that the gradual pace and the halfway separation of the government from enterprises may be inevitable in the initial stage when institutional environments and socialist legacies impose serious constraints on the restructuring.

Keywords:

State-owned enterprise, Ownership restructuring, Corporate governance, Transaction cost, China

Acknowledgments

We wish to thank the participants at the 8th SJE International Symposium on Corporate Governance and Restructuring in East Asia and, particularly, Young Lee for their very helpful comments on an early draft of the paper. All errors are ours. Financial support from the Research Grants Council of Hong Kong (grant # RGC.HKUST.6053/98H) is gratefully acknowledged.

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