Local State-owned Enterprises Research Articles

Construction of transportation infrastructure and the mixed ownership reform of state-owned enterprises: based on the perspective of high-speed rail opening

ABSTRACT We study the impact of transportation infrastructure construction on the degree of mixed-ownership reform of local state-owned enterprises. We find that the opening of high-speed rail can significantly promote the mixed ownership reform process of local state-owned enterprises. Mechanism testing shows that the opening of high-speed rail can promote inter-regional market integration and reduce the transaction costs of potential private investors participating in mixed-ownership reform, and improve the operational activities and management characteristics of state-owned enterprises, and strengthen the intrinsic motivations of potential private investors to participate in mixed-ownership reform, thereby having a positive impact on the degree of mixed-ownership reform of local state-owned enterprises. Further research finds that the above-mentioned effects are sustain-able and more obvious among local state-owned enterprises and state-owned enterprises in competitive industries with weak government influence, which can ultimately improve the capital market value and labour productivity of state-owned enterprises.

State Ownership Heterogeneity and Corporate Innovation: New Evidence from a Hierarchical Perspective

Unlike prior research, this study re-examines the relationship between state ownership and corporate innovation from a hierarchical perspective. Drawing upon institutional theory, our findings reveal the heterogeneous impact of state ownership, elucidating the positive role of central state ownership in fostering corporate innovation, while highlighting the inhibitory effect of local state ownership. This conclusion withstands rigorous scrutiny through a battery of robustness checks. Mechanism analysis indicates that central state-owned enterprises stimulate innovation by increasing innovation investment and enhancing efficiency, whereas local state-owned enterprises create obstacles for both innovation investment and efficiency. Our paper offers a hierarchical interpretation of the mixed evidence regarding the relationship between state ownership and corporate innovation. Whether state ownership serves as a facilitator or a hindrance to innovation depends on whether central or local state-owned enterprises dominate the national innovation process. Overall, this study offers new insights into the complex effects of state ownership heterogeneity on corporate innovation activities in emerging economies like China, advancing our understanding of the subtle relationship between corporate governance and innovation.

Assessing the asymmetric cost behavior in China

PurposeA country’s institutional environment influences every facet of its business. This paper aims to identify institutional factors (state ownership, government attention on employment and employees’ educational background) that affect the asymmetric cost behavior in China.Design/methodology/approachUsing 2,570 listed firms’ data between 2002 and 2015, we use empirical models to explore the effects of state ownership, government attention on employment and employees’ educational background on the asymmetric cost behavior in China.FindingsThis study found that the asymmetric cost behavior of central state-owned enterprises (CSOEs) is greater than local state-owned enterprises (LSOEs). Meanwhile, the empirical results show that government attention on employment is reflected in five-year government plans, and employees’ educational backgrounds are positively associated with asymmetric cost behavior.Originality/valueThis study contributes to the economic theory of sticky costs, institutional theory and asymmetric cost behavior literature by providing evidence that shows how government intervention and employee educational background limit the flexibility of corporate cost adjustments. Additionally, this study provides guidance to policymakers by showing how government long-term plans affect firm-level resource adjustment decisions.

The effect of digitalized tax administration on stock price crash risk: A natural experiment in China

Using a digitalization event of tax governance (the Golden Tax Project III (GTP III)) as a natural experiment, this paper exploits the staggered DID method to investigate the impact of digitalized tax administration on firm-specific future stock price crash risk (SPCR) in China. Our results reveal that the GTP III appears to reduce SPCR. Our findings highlight that the digitalized tax administration has a more prominent association with SPCR for local state-owned enterprises (compared to central state-owned enterprises) and privately controlled enterprises with political connections (compared to privately controlled enterprises without political connections). We also find that the mitigation effect of digitalized tax administration on SPCR is only significant in regions with relatively developed digital economies, for firms managed by senior executives without any financial backgrounds, and firms that receive less media attention. Further investigation reveals that the digitalized tax administration helps to reduce SPCR through the mechanism of tax avoidance, rent-seeking and information transparency.

Piercing the corporate veil system and creditors protection: Based on the investigation of debt paying ability--Empirical evidence from the 2005 Company Law amendment.

This paper uses the difference-in-differences model to research how the "piercing the corporate veil" system marked by the 2005 Company Law amendment affects the level of corporate creditor protection. The research results show that private enterprises and local state-owned enterprises are sensitive and significant to this legal amendment. In contrast, local state-owned enterprises are more sensitive and have a stronger motivation to protect the interests of creditors. The motivation of companies with weaker profitability for creditor protection lasts not only for the year of law revision but also extends to the year of implementation. With the law's implementation, the growth effect of creditor protection for local state-owned enterprises has become more significant. Further analysis shows that the main findings of this article are more significant in companies with larger debt scales, companies with a higher year-on-year growth rate of operating income, companies with controlling shareholders, and companies with higher stock market capitalization. From an empirical research view, this paper explains the economic effect and mechanism of the whole corporate personality under the complete system and adds economic evidence for how the law acts on the capital market.

Governance of tax incentives: An effectiveness and differential analysis based on the Chinese context

The disordered and rampant local tax incentives have interfered with regular business competition and resource allocation. In China, the government has undertaken a new round of policy adjustment to comprehensively sort out and standardize tax incentives, trying to realign value-oriented tax competition among local governments. Thus, this paper examines the real effect of standardizing tax incentives using China's State Council Documents No. 62[2014] and No. 25[2015], with the measurement of abnormal tax burdens and abnormal fiscal subsidies. The result shows that this round of policy governance has maintained the steadiness of the overall tax burden and fiscal subsidy, and only abnormal tax burdens and fiscal subsidies have been reduced through structural adjustment; In addition, it has also taken into account the difference among regional economic development. The governance in the Midwest is generally lighter than in the East. Meanwhile, the effect of governance among different property enterprises has presented a reduced tendency as "state-owned enterprises – local state-owned enterprises – private enterprises".

Public investment as downward benefit distribution: Theory and evidence from China’s public–private partnership programs

Although previous studies have documented the political cycle of public investment in various countries, we still know little about its distributional consequences. We address this question by analyzing an emerging form of public infrastructure investment in China: public–private partnership (PPP). We argue that mayors use infrastructure investment to distribute benefits, thereby securing local compliance and support. Our empirical analysis draws on a unique dataset that matches PPP contracts with Chinese mayors who served from 2010 to 2017. We demonstrate a salient tenure effect: mayors decrease public investment over time during their tenure. Moreover, the tenure effect is more salient among mayors who lack local work experience. Contract-level evidence shows that mayors disproportionately allocate more investment to local firms, especially local state-owned enterprises, to garner local support. We show that the downward tenure effect is mainly driven by officials’ survival concerns rather than promotion incentives.

Corporate financialization and investment efficiency: Evidence from China

This study analyzes the financialization impact on investment efficiency and the mechanism using data from listed nonfinancial companies in China from 2011 to 2020. Results reveal that financialization has a positive effect on investment efficiency. Cross-sectional tests show that corporate financialization can significantly improve the investment efficiency of local state-owned enterprises (SOEs) and non-SOEs, and enterprises in eastern and central China. According to mechanistic analysis, the study also finds that corporate financialization improves investment efficiency by alleviating financing constraints. By suggesting the government unblock financing channels and increase capital liquidity, our findings can guide the financial sector to better serve the real economy.

“Owner” or “Shareholder”: the understanding of the identity in the ownership reform of local state-owned enterprises

“Owner” or “Shareholder”: the understanding of the identity in the ownership reform of local state-owned enterprises

The Role of Privatisation in Sustaining Auditor Independence: Evidence from the Developing Markets

This paper investigates the role of structural ownership reforms in sustaining auditor independence through split-share structure reform (SSSR). Studying a sample of 1826 Chinese listed firms over the SSSR period in China, the results showed that auditor independence sustainability was less pronounced in local state-owned enterprises (LSOEs) compared with non-state-owned Enterprises (NSOEs). Nevertheless, after the SSSR, there is a significant enhancement in sustaining auditor independence. In particular, auditor independence sustainability is pronounced by providing an unqualified audit opinion, including an ‘emphasis of matter paragraph’ instead of issuing a modified audit opinion. This study contributes to the literature in two ways. First, it gives an empirical investigation into auditor independence sustainability efforts by the Chinese government through the SSSR. Second, it helps regulators and policy-makers in China and other emerging markets in evaluating the SSSR efforts to improve auditor independence.

When does a female leadership advantage exist? Evidence from SOEs in China

AbstractResearch Question/IssueWe approach the ongoing debate in the literature on when and why a female leadership advantage exists in the context of China. In particular, we examine whether female CEOs outperform male CEOs in state‐owned enterprises (SOEs).Research Findings/InsightsWe show that a female leadership advantage exists in SOEs. We find that the female leadership increased performance is attributed to improved profitability, capital structure, and operating efficiency. The magnitude of this gender effect is bigger in central state‐owned enterprises (CSOEs) than that in local state‐owned enterprises (LSOEs). The results are robust to additional tests that mitigate the sample selection and other endogeneity concerns.Theoretical/Academic ImplicationsWe use the role congruity theory to motivate and develop the hypotheses drawing insights upon the literature in psychology and leadership. Female CEOs are perceived as less congruent with their leadership roles given the gender role stereotypes. Thus, they face more challenges and difficulties than male CEOs. These obstacles take at least two forms which are significant in SOEs: shareholder activism and sex discrimination. Female CEOs have to outperform their male counterparts to alleviate the pressure from shareholder activism and showcase their managerial skills and abilities.Practitioner/Policy ImplicationsFor the state shareholders, the extra scrutiny in selecting female CEOs should be lifted given this outperformance. The evidence is also relevant for CEOs to choose their career paths among different types of firms, for boards of directors on their strategic decisions on CEO hiring, and for policy makers to promote the female leadership advantage.

Industrial Poverty Alleviation, Digital Innovation and Regional Economically Sustainable Growth: Empirical Evidence Based on Local State-Owned Enterprises in China

This paper takes the industrial poverty alleviation of local state-owned enterprises in China as the research object, and takes the local state-owned enterprises listed in Shanghai and Shenzhen A shares in China from 2016 to 2020 as the sample to empirically test the impact of industrial poverty alleviation on the sustainable economic growth of the region and consider the regulatory effect of digital innovation. This study found that China’s local industrial poverty reduction behavior in state-owned enterprises can effectively promote regional economic growth. Moreover, the digital innovation produced a regulating effect; that is, if enterprises carry out digital innovation and have a higher degree of digital innovation, their industrial poverty alleviation behavior will have a stronger role in promoting regional economic growth. This conclusion still holds even after controlling for factors of robustness and endogeneity. In addition, the study of influence mechanisms found that the proportion of primary industry in GDP was the mediating effect of industrial poverty alleviation on regional economic growth, and the proportion of primary industry in GDP had a partial mediating effect. Further heterogeneous group testing shows that the impact of industrial poverty alleviation on regional economically sustainable growth is more obvious in agriculture-related, local state-owned enterprises; non-high-tech, local state-owned enterprises; and local state-owned enterprises with subsequent poverty alleviation plans. The empirical evidence in this paper verifies the role of local state-owned enterprises’ participation in industrial poverty alleviation in promoting regional economic growth. It is a useful supplement to the research literature on the economic consequences of Chinese enterprises’ participation in targeted poverty alleviation, which helps to better understand such a phenomenon and also provides a powerful explanation for China’s poverty alleviation achievements.

The intra-regional spillover effects of bond defaults: Evidence from the Chinese corporate debt market

Taking the first bond defaults in each province in China as credit events, we adopt a staggered difference-in-difference model and find that credit spreads of other corporate bonds in the same province increase by 15 basis points, suggesting spillover effects. The spillover effects are stronger on local state-owned enterprises (LSOEs) and non-state-owned enterprises (Non-SOEs) than on central state-owned enterprises (CSOEs). Moreover, the defaults of LSOEs trigger the greatest spillover effects among all types of defaults. Provinces with higher guarantee capability experience fewer spillover effects. Our findings suggest intra-regional spillover effects from investors' shaken beliefs on implicit government guarantees.

Home country institutional restraint and outward foreign direct investment: Evidence from Chinese heterogeneity enterprises

Based on an analysis of 2671 outward foreign direct investment (OFDI) deals completed by Chinese enterprises from 2009 to 2018, this study evaluated the role of the OFDI regulatory policies on Chinese heterogeneity enterprises’ OFDI. The difference-in-differences model is applied with the OFDI data to control the influence of endogeneity resulting from missing variables. The results show that the regulatory policies’ effect on Chinese enterprises’ OFDI varies with the ownership structure of the home country’s enterprises. The implementation of OFDI regulatory policies significantly reduces the OFDI of state-owned enterprises but does not significantly impact that of privately owned enterprises. Interestingly, the policies significantly reduce the OFDI of central state-owned enterprises but do not significantly impact that of local ones. The former benefit from central government institutional support, and their main purpose is to comply with national strategy. By contrast, local governments administer the local state-owned enterprises, whose main purpose is to promote local economic development. In terms of seeking profits, their investment choices are similar to those of privately owned enterprises. This study also examines China’s OFDI policy responses.

Nationalization of private enterprises and default risk: Evidence from mixed-ownership reform in China

We contribute to the existing literature by demonstrating how the default risk of enterprises is driven by the nationalization of private enterprises (NPE). Overall, we find that the implementation of NPE promotes default risk, and the effect follows an inverted U-shape over time. Mechanism tests show that the effect of NPE on default risk works mainly through three channels: weakening corporate governance, exacerbating debt expansion, and reducing investment efficiency. Further distinguishing the characteristics of NPE, we find that the effect of NPE on default risk is more pronounced for private enterprises transformed into local state-owned enterprises (SOEs), private enterprises acquired across regions, private enterprises with a higher external guarantee rate, and equity pledge rate.

Audit Reform, Local Government Intervention and Tax Burden of State-owned Enterprises

The tax burden of state-owned enterprises has been widely disputed under the intervention of the government, and the tax collection and management audit can effectively restrain the intervention of local governments. Therefore, this paper theoretically analyzes the impact of audit management system reform on the tax burden of state-owned enterprises and the mechanism of action. The research shows that the audit reform has a catalytic effect on reducing the tax burden of local state-owned enterprises, which is mainly reflected in the reduction of the circulation tax burden of local state-owned enterprises, and the reduction of the tax burden of state-owned enterprises by reducing the degree of local government intervention.

Assessing the effects of the new-type urbanization policy on rural settlement evolution using a multi-agent model

Urbanization is an inevitable trend of modernization. In recent years, the Chinese government has proposed a new urbanization policy to accelerate the citizenization of the migrant agricultural population. The proposal of China's new urbanization strategy will inevitably cause the large-scale migration of China's urban and rural population, thus impacting the evolution patterns of China's rural settlements. To investigate the future evolution trends of rural settlement patterns against the background of new-type urbanization, we constructed a rural settlement multi-agent system (RSMAS) that can explicitly simulate the influences of government policies. In the model, we set four types of agents, including urban area, rural area, government, and peasant household. Through top-down control and bottom-up response, the model can reveal the mutual gaming relationships, influencing relationships, and feedback relationships among agents against the background of new-type urbanization. Taking Jizhou District of Tianjin, which is one of the first pilot areas of new-type urbanization, as an example, we first simulated the changes of rural settlement patterns in Jizhou District from 2005 to 2015 using the RSMAS. The accuracy of the model simulation was 60.96%, indicating that the model has good reliability. Second, we predicted the impact of the new-type urbanization policy on the rural settlement patterns in Jizhou District in 2030, using 2015 as the starting year. The household registration system is no longer the key constraint to urbanization. The trend of the expansion of rural settlements has been effectively curbed after the implementation of new urbanization. In addition, government-led urbanization processes would increase the local financial burden. Therefore, we suggest that the government should effectively control these processes, activate the rural financial market, and promote the participation of local state-owned enterprises in financing.

Determinants of Local SOE Board Size and Composition: Evidence From England

Local State-Owned Enterprises (SOEs) play an increasingly important role in the delivery of key public services to citizens across the world. Because they operate at arms’ length from their parent organizations, arrangements for the effective governance of local SOEs are a major concern for public administration researchers and policy-makers alike. In many countries, local SOEs are supervised by boards of directors responsible for managing and monitoring service provision. Agency theory suggests that the size and composition of these boards is likely to be influenced by the ownership structure, organizational complexity, and growth opportunities. Using seemingly unrelated regressions to analyse the size and composition of local SOE boards in England, this study finds that large, minority public-owned, not-for-profit SOEs and those with more public sector partners have larger boards of directors, and that older, majority public-owned, and not-for-profit SOEs have more politicians on the board. The theoretical and practical implications of these findings for the governance, accountability and performance of local SOEs are discussed.

Leverage of Local State-Owned Enterprises, Implicit Contingent Liabilities of Government and Economic Growth

Local state-owned enterprises (SOEs) working together with local governments can promote economic growth. However, an increase in the implicit contingent liabilities of local governments due to implicit guarantees given to SOEs has a negative effect on economic growth. The classical socialist theories and the economic stability in each financial crisis of China show that the macroeconomic efficiency of SOEs is more important than the microeconomic efficiency, and microeconomic efficiency in neoclassical economic theory cannot reflect the nature of SOEs. It is of great practical and theoretical significance to make a more comprehensive and accurate judgment on the efficiency of SOEs. This paper constructs an index of local governments’ implicit contingent liabilities in 31 provinces based on the 488 local SOEs to study the impact of implicit contingent liabilities, and the time period is the year 2007 to the year 2020. Our findings show that an increase in local SOEs’ assets suppresses economic fluctuations at the cost of increasing government’s implicit contingent debt and has a negative impact on economic growth. Unlike the fiscal influence path of explicit debt, implicit contingent debt restrains local economic growth through financial markets. The deleveraging of local SOEs and improving their efficiency can improve the overall efficiency of local funds and reduce the negative effect of local governments’ implicit contingent liabilities on economic growth.

Unification of Rights and Responsibilities, and the Innovation of Local State-Owned Enterprises in China: A Quasi-Natural Experiment

Unification of Rights and Responsibilities, and the Innovation of Local State-Owned Enterprises in China: A Quasi-Natural Experiment