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

minority shareholders’ interests when the dominant shareholders’ holdings are below a certain level. Our results are timely for policymakers and can assist in better aligning the effects of ownership on firms’ performance and can also provide guidelines for China’s future enterprise reforms. In 2013, China’s new government released its social and economic reform agenda for the next 10 years, highlighting major steps to further reform SOEs and plans to adopt such measures as “pushing further ownership diversification” as a “high priority. ” 20 The benefit of privatization can be realized by clearly defining property rights (Martin & Parker, 1997). In this regard, our results suggest that partial privatization has not led to higher performance and efficiency gains, especially when SOEs still have monopolistic powers. Shleifer and Vishny (1994) argued that efficiency gains from privatization can only be expected if control rights are passed to private investors. 21 Prior researchers who have studied the post- privatization performance of former SOEs have reported positive results for the OECD countries (Bortolotti & Faccio, 2006). However, the empirical evidence from the developing world is more equivocal and in some cases negative, thus indicating that privatization may not always work when addressing the operational inefficiencies of former SOEs (Leng, 2009). In this regard, Merritt and Michael (2000) reported that privatized firms in Russia have suffered from the pervasive interference of politicians, and enterprises are unable to freely implement their profit-maximizing strategies. Similarly, the oligarchs, who acquired the former large SOEs after privatization in Russia, colluded with politicians to obtain financing or set up excessive administrative barriers against potential competitors to ensure their monopoly status (Galina & Robert, 2003). Consequently, market failures tend to distort incentives Leng (2009) argued that the rapid expansion of SOEs is likely to cause a “spill-over” problem in other parts of the economy since they consume large quantities of social and financial resources and use them inefficiently. Chen et al. (2008) also reported that the efficiency gains of China’s former SOEs after privatization only appear when control rights are passed to a private entity. Consequently, our results provide support for the view that further ownership reform of large SOEs in China should be followed by increasing market competition, which could be beneficial for improving SOE performance. In this regard, Stiglitz (1999) argued that the effects of privatization in transition economies largely depend on the existence of a free competitive market. 20 “SOE reforms to be launched after Plenum.” China Daily, November 11, 2013. 21 Control privatization refers to the situation where government relinquishes its control rights over state enterprises or reduces its holdings as a non-controlling shareholder after privatization. Revenue privatization refers to the situation where the government retains a controlling stake after privatization. for non-politically linked businesses and reduce the benefits provided by private ownership even after complete privatization (Leng, 2009). The findings of studies undertaken in China and Russia suggest that in the absence of a free competitive market, “spill-over” problems may remain regardless of whether privatization is partial or complete. Finally, because of the lack of good corporate governance and legal protection for minority shareholders, the largest shareholders in both local SOEs and private firms have the opportunity to expropriate these shareholders when their holdings reach a certain level. Accordingly, it is recommended that Chinese policymakers enact regulations to improve the monitoring of the largest shareholders, especially at the local level. R eferences R éférences R eferencias 1. Bai, C., Liu, Q., Lu, J., & Song, F. M. (2004). Corporate governance and market valuation in China. Journal of Comparative Economics, 32(4), 599-616. DOI: 10.1016/j.jce.2004.07.002 2. Beiner, S., Drobetz, W., Schmid, M. M., & Zimmermann, H. (2006). An integrated framework of corporate governance and firm valuation. European Financial Management, 12(2), 249-283. DOI:10.1111/j.1354-7798.2006.00318.x 3. Bhagat, S., & Bolton, B. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14(3), 257-273. 4. Bortolotti, B., & Faccio, M. (2006). Reluctant privatization (CEI Working Paper, Series No. 2006- 5). Hitotsubashi University, Institute of Economic Research, Tokyo. 5. Bortolotti, B., Fantini, M., & Siniscalco, D. (2001). Privatization: Politics, institutions, and financial markets. Emerging Markets Review, 2(2), 109-137. 6. Boubakri, N., Cosset, J-C., & Guedhami, O. (2002). Liberalization, corporate governance and the performance of newly privatized firms (Working Paper). Laval University, Quebec. 7. Chen, G., Firth, M., Xin, Y., & Xu, L. (2008). Control transfers, privatization, and corporate performance: Efficiency gains in China’s listed companies. Journal of Financial and Quantitative Analysis, 43(1), 161-190. 8. Chen, G., Firth, M., & Xu, L. (2009). Does the type of ownership control matter? Evidence from China’s listed companies. Journal of Banking & Finance, 33(1), 171181. 9. Cheung, Y. L., Rau, P. R., & Stouraitis, A. (2010). Helping hand or grabbing hand? Central vs. local government shareholders in Chinese listed firms. Review of Finance, 14, 669-694. 10. Claessens, S., & Djankov, S. (1999). Ownership concentration and corporate performance in the The Relationship between Ownership Identity, Ownership Concentration, and Firm Performance: Evidence from China 29 Global Journal of Management and Business Research Volume XXII Issue VIII Version I Year 2022 ( ) A © 2022 Global Journals