Higher State Ownership Research Articles

How does state ownership affect pollution control? Evidence from the Chinese iron and steel industry

Little is known about how state ownership affects firms' environmental activities. Building on corporate governance literature, we examine the two strategies that Chinese state–owned iron and steel companies may adopt: they can invest in environmental projects, but can also pay an environmental fee and keep polluting. With longitudinal data collected from public Chinese steel firms from 2001–2008, we found that in any given year, the percentage of state ownership does not significantly affect environmental investment; however, a higher percentage of state ownership can decrease environmental fees. As time goes by, firms with a higher state ownership can pay even fewer environmental fees than they used to.

Value Creation after State Share Transfers: New Evidence from China

We investigate state share transfers of Chinese listed companies on how financial conditions and ownership structure affect such restructuring decision and shareholders’ wealth. Chinese stock market reacts positively to all state share transfers around announcements. The short term positive market reaction is persistent in the long run. We observe significantly positive three-year buy-and-hold abnormal returns for all state share transfers especially those to state legal person shareholders and others. The post stock performance can be explained by the ownership structure of the transferring firms. The firms with higher state ownership, higher institutional ownership, and higher block holder influences report significantly higher three-year buy-and-hold abnormal returns. Our findings support the notion that reduction in state shares as a result of state share transfers creates value both in the short run and in the long run. Institutional investors and large block holders in China exert monitoring on corporate decisions such as state share transfers to increase shareholders’ wealth.

Corporate communication for Vietnamese listed firms

PurposeThe purpose of this paper is to investigate the impact of independent directors and ownership structure on voluntary disclosures of Vietnamese listed firms.Design/methodology/approachYear‐ending 2008 annual report disclosures of 45 Vietnamese listed firms are analyzed. Voluntary disclosure is measured using a Vietnamese Disclosure Index adapted from prior literature. Descriptive and inferential statistics (T‐test, analysis of variance, multiple regressions (ordinary least squares)) are employed to generate empirical insights.FindingsThe results indicate that the level of voluntary disclosure among Vietnamese listed firms is relatively low (24.23 per cent). There are higher levels of disclosure relating to director and senior management details but far lower in regards to social issues. State ownership and managerial ownership are negatively and positively related to the extent of voluntary disclosure respectively. Moreover, bigger firms are found to be positively associated with voluntary disclosure.Research limitations/implicationsThe results of this study are limited to one year – 2008 – and thus, could be biased as disclosures can change over time.Practical implicationsVietnamese regulators should focus on strengthening the regulations governing the level of corporate communication in firms with high state ownership as well as encouraging more disclosure of non‐financial information to strengthen its market information transparency.Originality/valueThis study is one of the first examining the level of corporate voluntary disclosure practices among Vietnamese listed firms. Evidence from this study extends the existing voluntary disclosure literature on emerging economies whilst providing valuable insights to Vietnamese policy makers in the process of developing and improving its financial reporting regulatory framework.

What is holding back productivity growth in India ?

This article examines recent micro-evidence on the productivity of Indian firms, helping to explain why India’s manufacturing sector has not performed as well as many observers expected. A series of structural distortions are documented, all of which may depress the performance of manufacturing, and thus the economy as a whole. These distortions exist at multiple levels, and reflect long-standing problems with the reallocation of labour across sectors, the excessively small scale of firms, low firm turnover, poor product market integration, high industry concentration and persistent state ownership. Combined, these phenomena represent severe restraints on the level and growth of productivity in manufacturing, and suggest that much remains to be done to improve the strength and sustainability of India’s development path.

Financial Reporting Incentives for Conservative Accounting: The Influence of Legal and Political Institutions

In this paper, we explore how reported accounting numbers are shaped by the institutional structure of the country in which firms are domiciled. We seek deeper understanding into the nature of financial reporting incentives created by an economy's institutional structure. We focus on financial reporting incentives related to accounting conservatism. To this end, we empirically analyze relations between key characteristics of economy-level institutions and one dimension of accounting conservatism, the asymmetric recognition of economic gains and losses into earnings. We also provide evidence on channels through which specific institutions manifest their influence on observed conservatism. Channels investigated include the use of accounting numbers in designing debt and compensation contracts, in supporting securities-related litigation, in motivating the behavior of public-sector regulators, and in mediating the relations between politicians and private sector business firms. We document that firms in countries with strong judicial systems reflect bad news in earnings faster than firms in countries with weak judicial systems. We show that higher judicial quality and higher usage of public bonds or more diffuse ownership structures leads to more conservatism. Also, strong public enforcement aspects of securities law (but not private enforcement) slows recognition of good news in earnings relative to firms in countries with weak public enforcement. Finally, firms in countries with common law legal origin combined with high risk of expropriation by the state and high state ownership of enterprises speed the recognition of good news and slow the recognition of bad news relative to firms in countries with less political involvement. This result is reversed in countries with civil law legal origin and high risk of expropriation and high state ownership of enterprises. Thus, firms appear to adjust their financial reporting in response to the nature of the State's involvement.

Determinants of Performance Improvements in Privatized Firms: The Role of Restructuring and Corporate Governance

During the second half of 1999, the cumulative value of privatization sales proceeds received by governments around the world topped $1 trillion. While it has thus significantly reduced the global fiscal burden, and has significantly altered the world's economic landscape, privatization has also raised important questions. While there is now ample empirical evidence that privatization improves the performance of divested firms, to date there has been very little study of why these performance improvements occur. We use a sample of 119 firms (from 29 countries and 28 industries), privatized via public share offering between 1961 and 1995, to address this important issue. We first contribute to the existing empirical literature by documenting significant increases in profitability, efficiency, output, and capital expenditures, and significant decreases in leverage following privatization. Unlike any other large-sample empirical study of share-issue privatization, we then study the determinants of these performance improvements using six proxies for performance changes. Prior to privatization, governments may choose to restructure firms through ownership changes (i.e., establish relation with strategic foreign investors, implement employee share ownership plan) and/or acquisitions and divestitures and/or financial restructuring (i.e., debt write-offs). Our results confirm that both restructuring and changes in corporate governance are important determinants of post-privatization performance. Therefore, our data identify both micro and macro sources of post-privatization performance improvement. Following privatization, firms significantly increase profitability, output per employee, and real sales. These results add to the growing empirical evidence that, following privatization firms become more profitable and efficient. Our data provide evidence of stronger profitability gains for firms with lower employee ownership and higher state ownership, stronger output gains for firms in competitive industries and for firms in countries with growing economies. Stronger efficiency gains are observed when foreign ownership is high, for firms that restructured, for firms in developing nations and when the share offer size is relatively small compared to total national market capitalization. We find that higher levels of employee ownership are associated with greater increases in capital expenditure after privatization. Finally, our results indicate that leverage increases more for firms with higher foreign ownership, those located in developing economies and those in countries with rapidly growing economies.