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

whether they are orthogonal to the error term of the respective equation. The test for over-identifying restrictions is implemented where the equation has two or more instruments (Sargan, 1964). According to Panels A and B of Table VII, Hansen’s J statistics for equation (5) is 0.095 and is statistically insignificant, thus indicating that the instruments of the system are orthogonal to the error term and are all valid. Third, we checked whether the instruments used are “weak,” as this problem has the potential to cause severely biased results (Stock & Yogo, 2004). According to the results reported in Table VII, the F-statistic exceeds the general criterion of 10 (Stock & Watson, 2007), and we, therefore, conclude that the instruments used in equations (4) and (5) are not weak. Table VII Panel C reports the 2SLS regression results for equation (6) when the largest shareholder is PRIVATE. The coefficient of PRIVATE is positive and is statistically significant at a 1% level. The coefficient of STATUS is statistically insignificant, thus indicating that the participation of private investors investing in high- performing firms in local areas is not an important determinant of firm performance. The evidence regarding the concentration of ownership in private firms when market barriers exist is not convincing. The results of instrument validity tests reported in Panel C of Table VII suggest that the instruments used in equations (6) and (7) are not weak. Table 7: Two-Stage Least Squares Regression with Various Ownership Types and Tobin’s Q Tobin’s Q is the performance measure market value divided by total assets. SOECG is the proportion of shares held by the central government, SOELG is the proportion of shares held by the local government, and PRIVATE is the proportion of shares held by private investors. In estimating the 2SLS system, Tobin’s Q and SOECG, Tobin’s Q and SOELG, and Tobin’s Q and PRIVATE are treated as endogenous variables for simultaneous equations. LMGP refers to the log of remuneration of top-tier executives. SID is the strategic industry dummy. RESUDS is a fraction of total residual state shares, excluding the dominant shareholder’s proportion in listed SOEs. STATUS refers to the market status dummy that captures whether there is a strong trade barrier for private firms in China’s various regions. RESUDA is the proportion of shares owned by individual small investors. OPENNESS is the regional macro-economic indicator that labels the most export-oriented regions in China (ranked by each region’s proportion of the total value of exports and imports to provincial GDP over the 8 sampling years). SIZE is the natural logarithm of the book value of total assets. LEV is the ratio of total debt to total assets. IORA is the total growth rate and is used to control for investment opportunities. DEVELOPI is a geo-economic dummy variable for China’s more economically developed regions. Standard errors are reported in [ ] and ***, ** and † indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Panel A Panel B Panel C Variables SOECG Tobin’s Q SOELG Tobin’s Q PRIVATE Tobin’s Q Constant -0.682*** [0.017] 15.878*** [0.489] 0.349 [0.036] 14.663*** [0.422] -0.303**** [0.019] 12.136*** [0.459] Tobin’s Q 0.005*** [0.001] 0.007 [0.001] 0.004 [0.011] SOECG 2.266*** [0.335] SOELG 1.214 [0.174] PRIVATE 2.801*** [0.348] BLOCK 2.273*** [0.178] 2.348*** [0.187] 1.695*** [0.151] PFOR 0.872*** [0.184] 1.310*** [0.192] SID 0.673** [0.279] 0.064 [0.268] STATUS -0.198 [0.181] LMGP -0.084*** [0.004] 0.032*** [0.003] -0.238*** [0.013] RESUDS 0.195*** [0.010] 0.401*** [0.010] RESUDA -0.072*** [0.004] OPENNESS 0.006** [0.002] SIZE 0.031*** [0.001] -0.681*** [0.022] -0.004** [0.002] -0.634*** [0.019] 0.015** [0.001] -0.525*** [0.020] LEV -0.007*** [0.001] 1.021*** [0.091] 0.006 [0.012] 1.025*** [0.092] -0.008*** [0.002] 1.042*** [0.093] IORA -0.009*** [0.001] 0.229*** [0.028] 0.002 [0.002] 0.221*** [0.028] -0.014*** [0.003] 0.186*** [0.028] DEVELOPI 0.010*** [0.003] 0.109*** [0.028] -0.019† [0.003] 0.010*** [0.003] -0.011 [0.032] IndDummy yes yes yes yes yes yes YearDummy yes yes yes yes yes yes Chi 2 statistics (P- value) 108.02*** (0.000) 4634.10*** (0.000) 487.96*** (0.000) 4631.42*** (0.000) 899.67*** (0.000) 43332.61*** (0.000) R 2 (Root MSE) 0.227 (0.149) 0.41 (1.438) 0.452 (0.178) 0.396 (1.443) 0.645 (0.112) 0.367 (1.478) Obs 13273 Instrument Validity Tests Instrument Overriding Test 0.95 (0.864) 1.54 (0.218) 3.678 (0.215) The Relationship between Ownership Identity, Ownership Concentration, and Firm Performance: Evidence from China 26 Global Journal of Management and Business Research Volume XXII Issue VIII Version I Year 2022 ( ) A © 2022 Global Journals