2 - The relationship between the share structure of business groups and the performance of the listed affiliated firms

Abstract

The business group, a prevalent organizational form, serves as the engine for China’s economic growth. Since the state-owned business groups account for a large portion of China’s economy, the study of the link between the share structure in business groups and the performance of the listed affiliated firms is crucial. Using data on some 80 business groups from the years of 2005 to 2010 in Shandong Province, China, we find insights on the relationship between business groups and their listed affiliated firms: the longitudinal comparison between the performance of listed affiliated firms of state-owned and nonstate-owned business groups does not differentiate much. The result suggests that improving the management style and providing more decision-making power, rather than simply pursuing diversification of property rights, is an efficient way to enhance the performance of the business groups.