Chinese SOEs Research Articles

The Regulation of Chinese State-owned Enterprises in National Foreign Investment Laws: A Comparative Analysis

This paper sets forth three arguments in relation to the regulation of Chinese state-owned enterprises (soes) in national foreign investment laws. First, there is a broad convergence in national foreign investment laws on how to regulate Chinese soes when they make cross-border investments. Second, the nature and function of soes in China’s socialist market economy is still poorly understood. Consequently, the broad convergence in soe regulation in national foreign investment laws remains too crude a legal criterion in practice. Third, the complexity of Chinese soes in Chinese political and economic context calls for a more nuanced approach in their regulation in national foreign investment laws.

China’s secondary privatization: new evidence on controlling shareholders tunnelling

ABSTRACTThis article utilizes the 2005 split-share structure reform (SSSR) in China as a natural experiment and conducts difference-in-differences (DID) tests to analyse corporate governance changes among Chinese SOEs compared to POEs. We show that tunnelling significantly reduced in both POEs and SOEs after the SSSR. More importantly, we find a significant and positive ‘privatization effect’ on SOEs’ tunnelling activities during the post-reform period suggesting the reductions of tunnelling were smaller among SOEs than POEs following the SSSR. In contrast, excess returns around the SSSR indicate that investors expected a negative ‘privatization effect’ on SOEs’ tunnelling. These findings suggest that the quality of corporate governance did not improve among SOEs as a result of the secondary privatization as the stock market expected without fundamental changes to firm ownership and control following the SSSR. The benefits of privatization accrue to the government controlling shareholders rather than minority investors.

Nuking Misconceptions: Hinkley Point, Chinese SOEs and EU Merger Law

As Chinese outbound investment and acquisitions of European and other western assets reach hitherto unseen dimensions, the European Commission and other antitrust regulators are being called upon to assess the competitive impact of acquisitions by Chinese SOEs. A critical threshold issue, with both jurisdictional and substantive implications, is whether Chinese SOEs have a power of decision independent of the Chinese state. The EU Merger Regulation provides a clear framework for examining the independence of SOEs, regardless of their nationality. But the Commission’s case law as it pertains to Chinese SOE acquirers, up until very recently, failed to come to terms with the extensive evidence of multifaceted state control exercised by Beijing over its SOEs. In its March 2016 decision in the Hinkley Point case, the Commission has begun to take the bull by the horns. It is submitted, however, that the European antitrust regulator still has some way to go: evidence of the deeply pervasive nature of Communist Party and Chinese state influence over SOEs in the Middle Kingdom is extensive and can no longer be ignored.

CORPORATISATION OF CHINA’S STATE-OWNED ENTERPRISES AND CORPORATE GOVERNANCE

Most literature on the reforms of Chinese SOEs reported specific SOE efficiency problems – declining profitability and increasing loss making (McKinnon, 1994; Nolan, 1995; Sachs and Woo, 1997; Jefferson and Singh, 1999; Cook et al., 2000; Lin and Zhu, 2001). Faced with mounting losses in the state sector, in the mid1990s, the Chinese government began to shift the focus of SOEs reform from piecemeal measures to privatisation of small SOEs and corporatisation of larger ones. Research has shown that it is not realistic to entirely privatise all SOEs considering the important roles they have played in the national economy and the social responsibilities they have undertaken (Jefferson and Singh, 1999; Cook et al., 2000; Liu, 2000; Chen and Wills, 2002). The government hoped that corporatisation could be an achievable and effective way to improve the performance of large SOEs. The aim is to turn SOEs from entirely publicly owned companies to shareholding companies, which previously controlled by industry-specific government agencies at various administrative levels, could now be transformed into companies that are, at least in theory, independent of the state in decision-making and, through the issue of shares, diverse in ownership.

Does ownership heterogeneity matter in technological catch ups? Empirical evidence from Chinese SOEs and POEs

Ownership heterogeneity matters in firms' technological catch-up process. By combining visibility and capability logics, we propose that at the earlier stage of catch-up, SOEs are more likely to perform technology importation than technology assimilation, while POEs are more likely to perform technology assimilation than technology importation. Also, at the later stage of catch-up, SOEs are more likely to perform technology innovation than technology assimilation, while POEs are more likely to integrate various technology activities. Based upon a sample of SOEs and POEs in a technology cluster in China, our results support these arguments.

Does ownership heterogeneity matter in technological catch ups? Empirical evidence from Chinese SOEs and POEs

Ownership heterogeneity matters in firms' technological catch-up process. By combining visibility and capability logics, we propose that at the earlier stage of catch-up, SOEs are more likely to perform technology importation than technology assimilation, while POEs are more likely to perform technology assimilation than technology importation. Also, at the later stage of catch-up, SOEs are more likely to perform technology innovation than technology assimilation, while POEs are more likely to integrate various technology activities. Based upon a sample of SOEs and POEs in a technology cluster in China, our results support these arguments.

How much do CEOs influence risk attitudes in a firm’s internationalization? Exploring Chinese mining SOES and NSOES

This paper provides an insight into comprehending Chinese firms’ strategic behaviour on risks in outward foreign direct investment (OFDI). Qualitative case studies, based on eight Chinese mining state-owned and non-state-owned enterprises (SOEs and NSOEs). The findings suggest that: (a) the characteristics of CEOs (Chief Executive Officers) of both SOEs and NSOEs significantly influenced the firms’ internationalization risk attitudes; (b) the tenure of CEOs led to SOEs’ periodical and NSOEs’ perennial risk attitudes; (c) CEOs’ personalities and tenure tend to drive the directions of risk attitudes, while CEOs’ experiences and remuneration were linked with risk intensities. These results support the upper echelons theory, suggesting that in understanding different ownership types of Chinese firms’ internationalization risk attitudes, CEOs’ characteristics should be investigated.

Do Government Controllers Use the Corporate Control Market to Help Improve the Performance of Publicly Listed Chinese SOEs?

We examine whether the corporate control market is an important governance mechanism that the controlling shareholders of publicly listed Chinese SOEs employ to improve the performance of less efficiently run Chinese SOEs. Using an econometric methodology advocated by Maddala (1983), we show that expected future performance improvement is an important consideration in publicly listed Chinese SOEs’ control transfer decisions. This result holds for both state-to-private and state-to-state control transfers and the effect is stronger for publicly listed Chinese SOEs domiciled in provinces with stronger institutional environments. There is also preliminary evidence that the firms other than the control transfer target controlled by the acquiring ultimate owners are more efficiently run than the firms controlled by the selling ultimate owners. Overall, our results suggest that the Chinese Government actively uses the corporate control market to help improve the performance of publicly listed Chinese SOEs.

The correlation between corporate governance and market value: regime or signal?

Purpose – As literatures argue that managers’ personalities will affect both corporate governance structures and corporate performance, the correlation between them is a mixed result. The purpose of this paper is to separate different routes leading to the mixed correlation, and name the separated routes as regime effect and signal effect. Design/methodology/approach – By theoretical analysis, the authors list three routes leading to the correlation between corporate governance and corporate performance. Routes 1 and 2 show that governance can directly and indirectly change the performance; while route 3 shows that both the governance and performance are results of managers’ personalities, and the governance has no influence onto the performance, which means the correlation led by route 3 is fake. By design a new econometric methodology, this paper separates the mixed correlation between corporate governance and performance, and names the correlation led by routes 1 and 2 as the regime effect and the correlation led by route 3 as signal effect. Findings – By an empirical research on Chinese listed corporates, the authors find that the correlations between Chinese listed corporates’ market value and main corporate governance factors can be separated into regime effects and signal effects; and the authors also find that some factors (Share of Institutional Investors, Share of Real Controller and the Squared, Dummy of Identical CEO and Chairman, Ownership Concentration) only show regime effects, some factors (Separating Extent of Ownership and Controlling Right, Dummy of Provincial State-Owned Firms) only show signal effects, and some factors (Dummy of Republic State-Owned Firms, Scale of Board) show both. What’s more, the authors find out an interesting result that the state-owning has no negative regime effect on China SOEs’ performance but very significantly negative signal effect; in this paper, the authors suggest that this means the key negative factors of Chinese SOEs is not state-owning ownership structure but the managers’ corruption. Practical implications – As only the factors with regime effects can directly and indirectly affect corporates’ performance and the factors with signal effects show that there’re some managers’ personalities affecting both the governance and performance, the separation method in this paper can help shareholders knowing which governance factors will be helpful to improve the performance and which others will show managers’ hard-working or corruption intention. Originality/value – Separate the regime effect and the signal effect from the correlation between corporate governance and performance.

Shareholder Incentive Alignment and CEO Turnover: The Case of Split-Share Structure Reforms in China

In this study we analyze the effect of split-share structure reforms on CEO turnover and performance relationship in Chinese listed firms. We use special dataset that manually categorizes a large number of CEO turnover events as either forced or non-forced. By employing logit regression and interaction effects we find that sensitivity of abnormal stock performance to probability of forced CEO turnover in Chinese SOEs was positive during 1999-2005 but negative during 2006-2011. Post-turnover abnormal stock returns were also higher during 2006-2011 compared to 1999-2005 for Chinese SOEs. The evidence shows that split-share structure reforms affected the CEO turnover-performance relationship through exposure effect, that exposure to stock price changes has forced the owners Chinese SOEs to evaluate the managers for the poor stock performance. This also shows that alignment in the incentives of the minority and majority shareholders helps protect the interests of the minority shareholders by changing the internal monitoring mechanisms of the managers.

Corporate Cash Holdings and Adjustment Behaviour in Chinese Firms: An empirical Analysis Using Generalized Method of Moments

This study is intended to find out the motives of cash holding in Chinese firms and theories associated with these motives. The study is unique because it not only estimates the adjustment speed of corporate cash holdings but also discuss several firm specific factors that affects cash holdings in Chinese firms with special reference to Chinese SOEs and NSOEs. An extensive set of panel data comprising 1632 A listed Chines firms, over a period from 2001 to 2013 are taken for analysis. The study reports a lower adjustment coefficient for Chinese firms compared to other developed nations. The study finds that target level of cash holdings in Chinese firms is better explained by Trade off and Pecking order theories. To cope with issues of endogeneity and serial correlation the study apply GMM and random effects model with an added AR (autoregressive) term.

Politically Connected CEOs, Corporate Governance, and the Post‐IPO Performance of China's Partially Privatized Firms

The authors' study provides suggestive evidence of the negative effects of politically connected CEOs on the corporate performance and governance of publicly listed companies in China. Newly listed Chinese companies with politically connected CEOs are more likely to have boards that are populated by current or former government bureaucrats, and that generally exhibit low degrees of professionalism, as indicated by fewer directors with relevant professional backgrounds. At the same time, the operating and stock‐return performance of such firms has failed to match that of their politically unconnected counterparts.Thus, the authors' study provides more support for the argument that bureaucrats and politicians extract resources from listed SOEs under their control to fulfill objectives that are not consistent with firm value maximization. Expressed in more general terms, the main finding of the study is that the constraints on property rights faced by Chinese SOEs—namely the non‐transferability of state ownership and the right of the government to appoint CEOs—appear to have significantly negative effects on firm performance as well as board professionalism and governance. Removing these constraints will likely have to be a critical part of any future reforms that aim to improve the productivity of listed Chinese companies.

SOE Reform in China: Past, Present and Future

This article analyses the evolution of SOE reform in China, especially focusing on how SOEs benefited from the Chinese government's favourable policies and how such SOE favouritism impacts the Chinese macro economy and causes social problems. The article outlines SOE reform before Hu Jintao and Wen Jiabao took over the leadership of the country in 2002–2003 and investigates the nominal as well as the real performance of SOEs since 2003. The article also discusses the nature and functions of Chinese SOEs as well as the future direction of Chinese SOE reform.

Dynamics and Politics of Executive Reshuffle in Chinese SOEs -Time-Series Comparison among Telecom Companies-

Dynamics and Politics of Executive Reshuffle in Chinese SOEs -Time-Series Comparison among Telecom Companies-

Paths to globalization: Korean chaebol and Chinese SOEs

Paths to globalization: Korean chaebol and Chinese SOEs

Rent-seeking at Home, Capturing Market Share Abroad: The Domestic Determinants of the Transnationalization of China State Construction Engineering Corporation

Summary How do the Chinese central state and central state-owned construction enterprises interact with one another as China’s overseas contracting unfolds in the post-corporatization period? Building upon a neo-institutional analysis of the principal–agent relationship, this article finds that contrary to most of the accusations leveled against the global outreach of Chinese SOEs, state-backed transnationalization is by no means state-dominated. SOE managers’ continuous bureaucratic ties enable the firm to navigate through China’s gigantic but fragmented bureaucracy in favor of corporate commercial interests, which reflects the negotiated nature of the state–SOE relationship in the course of transnationalization.

Dragon Fears: An Examination of Canadian Perceptions of Chinese State-Owned Enterprises

“What’s so scary about the CNOOC-Nexen deal?” 1 reads an article regarding the recent takeover bid. Although the deal has been fully approved, the question is one of many still gripping the issue over CNOOC’s (China National Offshore Oil Corporation) takeover bid of Nexen, a Calgary based oil and gas company. 2 However, this ongoing issue has broader implications; specifically if Chinese state-owned enterprises (hereafter SOEs) present a challenge or opportunity for Canadian national security interests. With the decline in trade and economic activity in the United States, Canada’s largest trading partner, new opportunities for Canada have presented themselves. China is one of them, a rapidly developing state whose hunger for energy continues to grow. The uneasiness that has come with the CNOOC-Nexen deal and the Canadian government’s recent response, displays the misguided approach of Canada towards the growing Chinese power. This paper explores the erroneous conceptions of Chinese SOEs, the implications of this and the possible solutions that can benefit Canada in the long term.

Chinese State-owned Enterprise Investments in Uganda: Findings from a Recent Survey of Chinese Firms in Kampala

Within the large body of China-Africa literature, there is a growing body of literature that differentiates between China’s various economic actors, more specifically between its state-owned and private enterprises. This paper intends to contribute to this literature by comparing Chinese state-owned enterprises and hybrid (mixed owned) enterprises with private enterprises in Kampala, the capital of Uganda. An air of mystery often surrounds Chinese companies in Africa, this paper will provide some clarity concerning companies in Kampala. To do this we first look at the governmental assistance given to these companies, then the kind of assistance they potentially receive. Next we investigate what motivated these companies to come to Uganda, and how they established themselves, whether it is after a Chinese aid project or construction job, or some other route. We further investigate the size, employment policy and markets of these Chinese state-owned enterprises in Kampala. Finally we look at the employment of Ugandan labour and management, the problems faced by the enterprises and the environmental challenges, as well as how these are dealt with. We conclude that Chinese SOEs and mixed ownership companies in Uganda are involved in a small range of sectors, often capital-intensive sectors such as oil and construction, and are therefore also larger than the majority of the Chinese private enterprises. SOEs and mixed ownership enterprises tend to have arrived in Uganda earlier than most private enterprises, face slightly different problems, and are more interested in the Ugandan market as whole than their privately owned counterparts. More importantly, they have greater proportions of local employees and are more interested in indigenizing their workforces.

Employment Flexibility and Management Authority: A Case Study on Changes of SOE Hotel

The economic reform has had huge effects on the Chinese hotel industry and SOE hotels are a major player in this process. The ownership reform, pursuit of profits and focus on service quality demonstrate a changing context within which the external and internal impetus to reform is inevitable. Increasing employment flexibility, for reducing costs, in contract forms, compensation and working hours has not only broken low mobility, stagnation, and egalitarian distribution of wages, but has also undermined traditional authoritarian management. However, changes in administration do not necessarily achieve the reform aims of efficiency and effectiveness. The intensified hierarchy, managers’ unilateral power, and some authoritarian features are retained for the dominance of management power. The solution is to further reform by increasing empowerment and share of management power among lower-level employees.

What Makes SOE's Employees More Responsible? The Role of Ethical Leadership in Multilevel View

According to the historical reasons, individuali?½i?½s lack of responsibility and weak of trust within an organization have become one of the most issues in Chinese SOEs. In this paper, we first de...