Ownership Reform Research Articles

The dynamics of latifundia formation.

Land tenure inequity is a major social problem in developing nations worldwide. In societies, where land is a commodity, inequities in land tenure are associated with gaps in income distribution, poverty and biodiversity loss. A common pattern of land tenure inequities through the history of civilization has been the formation of latifundia [Zhuāngyuán in chinese], i.e., a pattern where land ownership is concentrated by a small fraction of the whole population. Here, we use simple Markov chain models to study the dynamics of latifundia formation in a heterogeneous landscape where land can transition between forest, agriculture and recovering land. We systematically study the likelihood of latifundia formation under the assumption of pre-capitalist trade, where trade is based on the average utility of land parcels belonging to each individual landowner during a discrete time step. By restricting land trade to that under recovery, we found the likelihood of latifundia formation to increase with the size of the system, i.e., the amount of land and individuals in the society. We found that an increase of the transition rate for land use changes, i.e., how quickly land use changes, promotes more equitable patterns of land ownership. Disease introduction in the system, which reduced land profitability for infected individual landowners, promoted the formation of latifundia, with an increased likelihood for latifundia formation when there were heterogeneities in the susceptibility to infection. Finally, our model suggests that land ownership reforms need to guarantee an equitative distribution of land among individuals in a society to avoid the formation of latifundia.

Has privatization of state-owned enterprises in Iran led to improved performance?

Purpose – The purpose of this paper is to study the effect of organizational change and privatization on the performance of state-owned enterprises (SOEs) using the data from Iranian firms during the period 1998-2006, and to test whether privatization leads to improved performance. Design/methodology/approach – The performance of these firms before and after privatization was examined. Pooled regression models were employed to assess the effect of privatization on performance indicators. Findings – The results show that privatization has not had a positive effect on the profitability of the firms listed on the Tehran Stock Exchange; rather, the effect has been negative. Moreover, the results reveal that privatization of these firms has had no effect on their sales effectiveness and efficiency; instead, the debts and risks of these firms has increased. Further, ownership reform is needed to remedy the situation. Research limitations/implications – The paper focuses on the effect of privatization on firm pe...

Policy and politics behind the public transportation systems of China's medium-sized cities: Evidence from the Huizhou reform

China is currently experiencing accelerated urbanization, with total urban population accounting for 52.6% of the country's total population in 2012. The next 10 years is foreseen to be characterized by the rural-to-urban migration of more than 300 million citizens. The consequent pressure on the environment compels small and medium-sized cities to accommodate the influx of migrants—a situation that inevitably brings new challenges to public utility management in the country. Most of these cities lack systematic management and consistent standards in the formulation of public transportation policy because of a vague decision-making mechanism. We empirically investigate the decision-making process for public transportation policy in China's medium-sized cities, focusing specifically on the ownership reform of the public transportation system in Huizhou, Guangdong. We apply Kingdon's multi-stream model and extensively interview stakeholders who shape public transit policy in the study area. On these bases, we discuss how the three streams—problems, policy, and politics—converge and initiate the reform of public transportation systems. Kingdon's model enables the identification of weak links in the transportation management systems of China's medium-sized cities.

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.

Going (More) Public: Institutional Isomorphism and Ownership Reform among Chinese Firms

AbstractPublicly traded Chinese firms recently reformed their ownership structures by converting non-tradable shares, which constituted two-thirds of shares outstanding and were held largely by the state, into shares that could trade on domestic exchanges. To facilitate this reform, tradable shareholders were compensated with stock grants from non-tradable shareholders. Our analysis focuses on the level of compensation, thecompensation ratio, the ratio of new tradable shares granted to tradable shares outstanding before the reform. Contrary to the predictions of asset-pricing models, most firms set the compensation ratio around 0.3. We explain this surprising convergence using institutional theory. In doing so, we analyze the power and interests of all relevant actors – not just owners, but also state regulators, executives, and other agents — and draw on insights from resource-dependence and agency theories. We find strong evidence of coercive and mimetic isomorphism, but no evidence of normative isomorphism. Because our dependent variable is continuous (a ratio), we are able to show that the mimetic effects we observe cannot be attributed to coercion or norms. Thus, we not only explain an empirical puzzle, we also advance institutional analysis of isomorphism by clearly distinguishing three isomorphic forces that have been conflated in much previous research.

Does Ownership Reform Influence Executive Pay in China?

The Split Share Structure Reform in China enables state shareholders of listed firms to trade their restricted shares. This renders the wealth of state shareholders more related to share price movements. We predict this reform will create remuneration arrangements that increase the relationship between Chinese firms’ executive pay and stock market performance. We confirm this prediction by showing such effect among state-controlled firms and especially those where dominant shareholders have greater incentives to improve share return performance. Our results indicate this reform strengthens the accountability of executives to external monitoring by stock market and therefore benefit minority shareholders in China. (First version: 29 March 2010)

Ownership change, institutional development and performance

This paper conducts a cross-country empirical study of the impact of institutions and agency conflicts on ownership reforms and their implications for changes in performance and efficiency. We examine two main questions. First, we evaluate the effects of certain property rights and institutional quality measures on performance and efficiency. We find that property rights and contracting rights protections contribute to stronger post-privatization performance. Second, we ask whether sectors undergoing changes from state to private ownership exhibit better or worse performance than sectors remaining public. We find an insignificant effect of privatization in ordinary least squares estimates and a negative short-term effect after correcting for endogeneity of privatization decisions that disappears in the long run, consistent with recently privatized enterprises facing short-run costs of restructuring and the challenges of mitigating agency and expropriation concerns.

GREEN OPEN SPACE IN LARGE SCALE HOUSING ESTATES: A PLACE FOR CHALLENGE

The renewal of urban areas by developing green open spaces increases the overall quality of life and helps to reduce social exclusion. Urban green open space can help to constitute a framework where urban society and culture can develop, and to increase identity and a sense of community. It can be used to provide a ground for education and raise an awareness of the way ecosystems function and how urban functions can be integrated into the natural system. Despite the known socio-economic benefits resulting from it, considerations regarding sustainable land use planning often occupy a secondary role when designing city quarters. There exist many pressures – essentially market-related and driven by short-term thinking – for unsustainable development. Housing ownership reform, carrying out denationalization and privatization, along with a core capital for many inhabitants has also created a range of problems – one of them: as a result of denationalisation of land properties, when the land in large-scale residential districts was returned to the previous owners and then provided as the minimum required land to the privatised buildings, the original spatial composition of districts was completely destroyed, creating a legal basis for new construction in large-scale residential districts.

Understanding Urban Wage Inequality in China 1988-2008: Evidence from Quantile Analysis

This paper examines change in wage gaps in urban China by estimating quantile regressions on CHIPS data. It applies the Machado and Mata (2005) decomposition, finding sharp increases in inequality from 1988 to 1995 and from 2002 to 2008 largely due to changes in the wage structure. The analysis reports how the returns to education and experience vary across wage quantiles, along with wage differentials by sex and party membership. The role of industrial structure, ownership reform and occupational change are also estimated. In the recent period, 2002 to 2008, falls in the returns to education and experience have been equalising. However, changes in every other category of observed wage differential – by sex, occupation, ownership, industrial sector and province – have served to widened inequality. The gender gap continued to rise, as did the gap between white collar and blue collar workers, and between manufacturing and most other industrial sectors.

Institutional Reforms and Foreign Market Entry of Emerging Market Firms: An Extended Firm-Specific Framework

The effects of corporate ownership reform in emerging economies on firms’ internationalization behavior remain understudied. By systematically linking reform outcomes to firms’ resources and attributes, we develop an extended theoretical lens by incorporating the FSA framework and insights from the organizational ambiguity literature to evaluate their rate of foreign market entry. We find support for our model through a balanced panel study of Chinese listed firms from 2002-2009. Our findings indicate that different forms of reformed shareholding result in varying effects on firms’ proclivity for outward FDI, reflecting the organizational diversity of such shareholders which experienced heterogeneous reform treatments. We also find evidence of complementarities and incompatibilities between ownership-based FSAs and other firm organizational characteristics including top management international experience and business group membership. The findings were robust across 6,653 firm year observations covering eight years.

The Performance Impact of Firm Ownership Transformation in China

Does firm ownership change affect performance? On the basis of a mean-value analysis and a fixed effects panel analysis of over 1100 Chinese companies during the period of ownership reform (1997-2003), this paper examines the performance impact of firm ownership transformation in China. The data used allows us to compare the performance impacts of different methods taken to restructure the ownership of state firms, such as full versus partial privatisation. For China, a state-capitalist nation and the world's largest state sector under transition, the mix of state and private ownership JEL Classification: L33, O40, P27

Does ownership matter for industrial agglomeration in China?

Economic reform has successfully diversified the ownership structure of the Chinese economy. Different types of industrial enterprises may differ in their incentives and capabilities to reap from agglomeration benefits. Using plant level data from 2007, this study found that foreign enterprises are the most agglomerated while the domestically owned enterprises are spatially dispersed. In many industries, SOEs are the most dispersed and are less likely to co-locate with other types of industrial enterprises. HTM and foreign enterprises however fully exploit the benefits of spatial clustering. In liberalized and globalized industries, privately or collectively owned enterprises are also highly agglomerated. The strong agglomeration of foreign and privately owned enterprises is positively associated with overall industrial agglomeration. Performance improvement of ownership reform shall be partially attributed to the more agglomeration of liberalized and globalized industries. Ownership does matter in the formation of industrial clusters in transitional economies like China.

Value Creation and Value Capture in Corporate Governance: Using the Value-Based Approach to Analyze an Ownership Reform of China's Listed Firms

Protecting minority shareholders is a central issue in corporate governance. A common tool of empowering minority shareholders is to curb controlling shareholders’ power of expropriating firm value, but this approach was rarely successful because of the resistance from powerful controlling shareholders. We examine an alternative way of empowering minority shareholders without directly fighting with controlling shareholders. A major corporate governance reform in China gave minority shareholders a decision right over certain actions that affected the creation of firm value. We demonstrate that, the greater the extent to which minority shareholders’ actions can influence the firm’s value ex-post, the more value controlling shareholders concede to minority shareholders ex-ante. This effect becomes even stronger when controlling shareholders are able to expropriate a larger portion of firm value.

Crossing the River by Touching Stones?: The Reform of Corporate Ownership in China

The privatization of Chinese enterprises in a low-legal-protection environment raises the question as to how minority shareholders are assured that their capital will not be expropriated. This paper sheds some light on this issue by examining the influence of controlling shareholders on the corporate performance of listed firms from 1997 to 2006. The first main finding is that firms controlled by local governments are more valuable to minority shareholders, whereas firms controlled by individuals are less valuable. The second main finding is that the post-WTO-accession relinquishment of control from local governments to private shareholders appears to have reduced corporate performance.

Margaret Garb . City of American Dreams: A History of Home Ownership and Housing Reform in Chicago, 1871–1919 . (Historical Studies of Urban America.) Chicago: University of Chicago Press. 2005. Pp. xv, 261. $40.00.

Margaret Garb . City of American Dreams: A History of Home Ownership and Housing Reform in Chicago, 1871–1919 . (Historical Studies of Urban America.) Chicago: University of Chicago Press. 2005. Pp. xv, 261. $40.00.

Energy Act: Implications for the Energy Sector in Thailand

For many years Thailand has attempted to conduct industry structural reform, ownership reform and regulatory reform in its electricity and natural gas sector. Although there have been some ownership reform in PTT, a public enterprise in oil and gas sector, progress in industry structural reform and regulatory reform in the gas sector has been slow. Moreover attempts to privatize EGAT, an electricity stateowned enterprise, have failed for several times due to inconsistent government policies and protests from various interest groups. One of the factors, to which slow and unsuccessful reform in electricity and gas industries in Thailand are attributed, is the lack of energy legislation. To take steps to expedite the reforms, the government drafted an “Energy Industry Act” which was enacted in 2007. This law consolidates the laws relating to electricity and gas sector with the objectives of promotion of competition and private participation in energy sector, and establishment of an independent, transparent, and accountable energy regulator as well as new regulatory framework. The question arises whether this law could generate a new hope in energy sector. To answer this question, first this study details the key features of the Energy Industry Act, particularly in the areas of industry restructuring, promotion of competition, establishment and governance of regulatory body and regulatory framework. Then this paper will review energy laws of some countries such as United Kingdom, Malaysia, India, Singapore, the Philippines, South Africa and Ghana, in order to assess the implications of these laws on changes in their electricity and gas industries and regulatory environments. Due to distinct characteristics of each country’s energy industries and diverse paces of reforms, the implications of the laws on progress of reforms could be different from one country to another. This paper also analyzes the likely implications of the Energy industry Act on Thailand’s electricity and natural gas business. The key features of the Act that provide significant changes in the energy sector are the establishment of the regulatory body and framework, the introduction of a new regulatory instrument called Power Development Fund and a new system for consumer protection. However the Act does not stipulate a clear design for energy structural reform. This paper also discusses the possibility of achieving regulatory governance and of promoting competition, consumer protection and environment.

Agency problems and liquidity premium: Evidence from China's stock ownership reform

Before the split share structure reform, China's publicly listed companies in domestic stock exchanges had two classes of stock: tradable and non-tradable shares. These two classes of stock had the same voting, cash flow, and all other legal rights except that non-tradable shares cannot be transferred at the open markets. From 2005, China implemented the reform to convert all non-tradable shares into tradable. In this reform process, the holders of non-tradable shares had to negotiate with their tradable counterparts to determine how much liquidity premium, or the compensation ratio, to pay the holders of tradable shares in order to obtain the liquidity right. Unlike previous studies, this paper starts with a theoretical model to identify the fundamental factors, including price discount before and after the reform, the percentage of non-tradable shares, the volatility of tradable share price, and the lockup period, that should determine the compensation ratio. We show that most of these factors are statistically significant in determining the compensation ratio. However, the agency problems induced by state and mutual fund ownerships weaken the role of the fundamental factors in determining the compensation ratios.

Ownership Reform and Issues of Chinese Big Four Banks

Ownership Reform and Issues of Chinese Big Four Banks

Agency in Inefficient Bureaucracies: Evidence from Chinese Ownership Reform

The 2005 firm ownership reform in China led to a contract renegotiation between the owners of different types of shares. In state-controlled firms, the reform process required agreement between the local or central government (the controlling shareholder) and private individuals (minority shareholders). We show that low-paid bureaucrat senior managers achieved worse outcomes on behalf of their state employers, relative to the outcomes in privately-controlled firms, only in cities with poor-quality bureaucracies where informal payments to government officials are commonplace. On average, minority shareholders fared relatively well in low-quality vertical institutional environments, where we might have expected a greater risk of expropriation. Our results suggest that agency in the bureaucracy can limit a low-quality government's ability to exercise unilateral power.

Transition from socialist to market economies: comparison of European and Asian experiences

Introduction PART I GENERAL FRAMEWORK OF COMPARISON Conversion and Divergence in Transition Process: Europe and Asia China's Transition to a Market Economy: How Far Across the River Two Reforms under Mono-Party Systems-Hungarian NEM and China's Reform PART II OWNERSHIP REFORM AND PRIVATIZATION SOE Reform and Privatization in Transition-China in Comparative Perspective Vietnamese Gradualism in SOE Reforms From Public to Private Savings: Decline of State Ownership in China PART III THE ROLE OF THE STATE AND MARKET IN TRANSITION The Special Safety Net in a Transitional Economy: the Case of China The State and the Transformation of Economic Systems Can the Japan Inc. Model be a Middle Course for Transition: Industrial Policy and Postwar Economic Development of Japan Market and Political Justice in Transformation of Poland PART IV LESSONS OF THE FIRST DECADE REVISITED Facts and Lessons of Ten Years of Transformation in Central Europe Lessons of Transformation in the Czech Republic: 1990-2000