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

Graph B: Tobin’s Q versus local SOEs Graph C: Tobin’s Q versus private investor controlled firms VI. T ests of R everse C ausality To check for the robustness of our results reported in Table VI, we have undertaken further investigation using Two-Stage Least Squares (2SLS) which allows us to control for the effect of endogeneity. Table VII Panel A reports the 2SLS regression results for equation (4) when the largest shareholder is a SOECG. The coefficient for SOECG is positive and is statistically significant at a 1% level, as with the results reported for OLS regression in Table VI. The coefficient of SID is positive and is statistically significantly related to Tobin’s Q, thus providing support for the view that the government cherry-picks firms in industries that tend to perform well. Table VII Panel B reports the 2SLS regression results for equation (4) where the largest owner is the local government. The coefficient of SOELG is statistically insignificant, thus indicating that local government ownership is not an important determinant of firm performance. Graph B shows that the relationship between local government ownership and Tobin’s Q is not clear, as reported by Bai et al. (2004), Chen et al. (2004), and Li et al. (2004). The coefficient of SID in Panel B is statistically insignificantly related to Tobin’s Q, thus providing support for the view that firms in which local government has the largest proportion of shares do not belong to the strategic industries sector. To check the robustness of the 2SLS regression, we have undertaken further analysis as follows. First, we checked whether the instruments are not correlated with both ownership and Tobin’s Q. Second, we tested the instruments’ validity by checking The Relationship between Ownership Identity, Ownership Concentration, and Firm Performance: Evidence from China 25 Global Journal of Management and Business Research Volume XXII Issue VIII Version I Year 2022 ( ) A © 2022 Global Journals