A Study of Ownership Concentration, Control and Evolution of Chinese IPO Companies

Abstract

One of the typical features in Chinese listed companies is that they have a mixed ownership structure and most of them have high concentration of state shares. By undertaking a sample of all the initial public offering ('IPO') companies in 1993, this paper focuses on analyzing the level and changes of different classes of shares in Chinese companies within different industrial sectors and size groups seven years after the IPO. T-tests and signed rank sum tests with mu, which equals to the average of the different types of shares in the full sample companies and equals to zero, are used respectively to investigate the pattern of concentration and control between different groups. First, we find that smaller and modern industrial companies are concentrated with indirect state shares (legal persons and employee shares) and A shares (domestic private investors) and are more widely held. Conversely, larger and traditional industrial companies are heavily concentrated with direct state shares. Second, smaller, growing and high-risk companies have a greater reduction of state control over the seven-year period. By contrast, the state retains majority control in larger and strategically important companies even seven years after their flotation. Lastly, the concentration of foreign shares displays the fact that the Chinese government has instituted favourable policies to support the development of larger companies and has given priority to them to raise foreign capital in the overseas market.