Global Journal of Management and Business Research, A: Administration and Management, Volume 22 Issue 8

Table 3: Dependent and Independent Variables Used and Their Measurement Return on Asset (ROA) Operating income divided by total assets Net Cash Flow to Assets (CFOA) [Sales – cost of goods sold – selling and administrative expenses – tax + net debt repayment + depreciation + amortization + net borrowing]/total assets Operating Cost to Sales (OCS) [Costs of goods sold + selling and administrative expenses]/net sales SPROD Net sales/number of employees Tobin’s Q Market value divided by total assets SIZE Natural logarithm of total assets LEV Total debt divided by total assets IORA Total asset growth ratio DEVELOPI Dummy variable equal to 1 if the company is headquartered in a region with above average GDP for the period 2005 – 2012 DSOECG Dummy equal to 1 if the central government is the largest shareholder DSOELG Dummy equal to 1 if the local government is the largest shareholder DPRIVATE Dummy equal to 1 if a private investor is the largest shareholder SOECG Proportion of shares held by the central government SOELG Proportion of shares held by the local government PRIVATE Proportion of shares held by private investors PCHINEXT Proportion of shares in private firms whose ownership cannot be verified BLOCK Proportion of shares held by blockholders that is greater than 5% of the total shares held PFOR Proportion of shares held by foreign institutional investors LMGP Natural logarithm of the top-tier executives’ remuneration in SOEs LNDTP Natural logarithm of the top three executives’ remuneration in privately controlled firms PEXESH Proportion of shares held by the top three executives in privately controlled firms SID Dummy equal to 1 if the industry belongs to the strategic industry group STATUS Dummy equal to 1 if private ownership is highly ranked in comparison to shareholding by local investors RESUDS Total residual state shares excluding the dominant shareholder’s proportion PBDSH Top three directors shareholding in SOEs RESUDA Proportion of shares held by individual investors OPENNESS Rank of the value of exports and imports to the provincial GDP Table IV Panel A reports the means and medians of the performance measures used in this study for each ownership type and all firms combined as well. 10 c) Model Specifications i. Comparison of corporate performance across controlling investor groups First, we examine whether firms held by a particular largest shareholder type (identity) achieve a higher level of financial performance. Since different types of largest shareholders have different incentives, interests, monitoring mechanisms, and political connections, we expect that different ownership identities/types may perform different functions in monitoring managerial behavior. To examine the distinct 10 Paired correlation (not reported) between different financial performance measures (ROA, CFOA, SPROD, OCS and Tobin’s Q) is very low, ranging from 0.002 to 0.135. This result indicates that performance measures used in this study are not correlated and each performance indicator considers a different characteristic of the firm’s activities. effects achieved by different ownership identities, five pairs of comparisons of mean and median results are undertaken for the four groups of firms, that is, SOECGs, SOELGs, PRIVATEs, and PCHINEXTs. The results of the comparison of means (medians) are reported in Table IV. Second, we empirically examine whether the largest shareholder identity contributes positively to a firm financial performance. Following Chen et al. (2009), we have undertaken OLS regression after controlling for year fixed effects as follows: OpPerformit = a0 + a1DSOECGit + a2DSOELGit + a3DPRIVATEit + β 1SIZEit + β 2LEVit + β 3IORAit + β 4DEVELOPIit + ε it (1) The Relationship between Ownership Identity, Ownership Concentration, and Firm Performance: Evidence from China 17 Global Journal of Management and Business Research Volume XXII Issue VIII Version I Year 2022 ( ) A © 2022 Global Journals