Impact of State‐Owned Equity Participation on the Risk‐Taking Capacity of Private Enterprises in China: Insights From a Quasinatural Experiment

Abstract

ABSTRACTResearch Question/IssueThis study rigorously explores the impact of state‐owned equity participation on the risk‐taking capacity of private enterprises following the introduction of China's Guiding Opinions on Deepening the Reform of State‐Owned Enterprises, which is considered a quasinatural experiment.Research Findings/InsightsState‐owned equity involvement significantly enhances private firms' risk‐taking capacity by improving resource access and reducing the constraints caused by limited resources and emerging legal systems. By analyzing A‐share private listed companies from 2009 to 2019 using a difference‐in‐difference approach, we find that firms with postpolicy state equity participation exhibit greater risk‐taking than those without. Firms that quickly integrate state capital postpolicy demonstrate heightened risk‐taking capabilities. These outcomes are robust even after extensive validation.Theoretical/Academic ImplicationsOur findings suggest that state‐owned shareholders play a significant role in augmenting private firms' risk‐taking through enhanced governance and supervisory mechanisms. This effect is mediated by increased innovation investments and the alleviation of financing constraints, emphasizing the nuanced role of state capital in private enterprise dynamics. This study underscores the positive impact of state equity participation, particularly among smaller and less‐marketized firms.Practitioner/Policy ImplicationsThis study offers a strategic direction for policymakers to reinforce a resilient and dynamic private sector through state capital engagement. Our study contributes to the understanding of the strategic implications of state‐owned enterprise participation in the private sector, offering evidence of its positive effects on risk‐taking capacity, which are vital for policy formulation and corporate governance enhancement.