Has the Split-Share Reform Influenced Corporate Behaviour? Chinese Firms’ Fixed Capital Investment 2002–2016

Abstract

In 2005, China took an important step in its privatisation process by initiating the Split Share Reform, whereby state-owned shares became tradeable. As a consequence, there was a significant rise in private holdings of shares of listed companies which previously had high state ownership. This paper considers the impact of this change, by examining how the SSR impacted on firms’ capital investment. Using a value-maximising approach, we empirically model Chinese firms’ fixed capital investment recognising that this was a period of global instability caused by the Global Financial Crisis. Controlling for its effects, we are able to consider if and how the reform influenced firms’ behaviour.