Private Enterprises In China Research Articles

The influence of managerial factors on the capital structure of small and medium‐sized enterprises in emerging economies

PurposeThe purpose of this paper is to explore the importance of owner/manager characteristics in explaining the capital structure decisions of entrepreneurial enterprises in emerging economies using a sample of Chinese small and medium‐sized enterprises (SMEs). Although mainstream theories from the finance literature are useful in explaining capital structure decisions for large firms in developed economies, they do not adequately explain the financing behaviour of SMEs in developing economies.Design/methodology/approachThe authors' mixed methods approach utilized both quantitative and qualitative methods to understand how managerial factors influence the capital structure of Chinese SMEs.FindingsThe findings suggest that the capital structure of SMEs in China is primarily influenced by aversion to external control and propensity to take risk. It was also found that owners with better networking ties generally require less debt financing because they can access adequate external resources through informal channels.Research limitations/implicationsThe main limitation concerns the extent to which the paper's findings can be generalised to outside of the specific location in which the research was undertaken. Future research might be extended to other emerging economies to determine whether the findings of this research are unique to China or robust across emerging economies, given different institutional contexts.Practical implicationsGiven the critical importance of fostering growth of private enterprise in China, policy makers should be aware of how the attitudes of owner/managers impact on the development of SMEs when developing mechanisms to support them.Social implicationsCitizens in economies which provide sufficient financing and support to entrepreneurial enterprises generally enjoy a higher standard of living than societies which do not.Originality/valueThis paper fulfils an identified need for studying how entrepreneurial firms in emerging economies make the financing decisions necessary to expand and grow.

Institutional Environment, Political Connection and Financial Constraints---Evidence from Private Enterprise in China

On the condition that formal institution of China has not protected the main economic entities especially non-public cases adequately, existed, and it has become a good complement to the formal institution. The majority of non-public economic entities form the political connection with the government actively in various ways, thus it improves their own ability to access debt capital and increases enterprises' value. We make a further refinement of the intensity of political connection in reference to historical research and make a combination of institutional environment, political connection and capital structure. We analyze the relationship between the three from both the and data validation perspectives. Firstly, we review the relevant papers from different angles. Then, we make some hypotheses, select the variables and build models to test the relationship between the three. We use the descriptive statistical analysis, Pearson correlation test, OLS regression testing and some other methods to make inference and proof to the theoretical hypotheses in order to provide quantitative basis for the theory of sublimation. Our research found that the listed private companies in the areas where have lower level of property rights protection and financial development are more likely to form a stronger political connection. The enterprises which have or have a stronger political connection can obtain more bank credit.

Strategic Thinking about Development of Large-Scale Multinational Enterprises in China

Under the contemporary development of economic development of economic globalization, the advantages that large-scale enterprises have in technology and scale make the presence of large-scale multinational group of companies have become a symbol that can measure the comprehensive strength and status of a nation. It is imperative to develop the large-scale multinational enterprises for their important and active role in the competition between nations, especially for private enterprises in China to improve their international competitiveness.

Outward internationalization of private enterprises in China: The effect of competitive advantages and disadvantages compared to home market rivals

This study uses the resource-based view of a firm to examine the outward internationalization of private firms in China. We investigate the extent to which advantages/disadvantages of resource endowment and organizing capability of Chinese private enterprises (relative to both state-owned enterprises and foreign-invested enterprises at home) may drive outward internationalization and affect their risk-taking tendency when going international. Our analyses of 553 Chinese private enterprises show that a Chinese private firm's likelihood of venturing abroad is associated with resource endowment advantages vis-à-vis foreign-invested enterprises, organizing capability advantages vis-à-vis state-owned enterprises, and organizing capability disadvantages vis-à-vis foreign-invested enterprises. These same advantages (or disadvantages) in organizing capabilities also increase a firm's likelihood of choosing a high-risk entry mode. We also find that a firm's resource endowment and organizing capabilities interact with each other and mutually enhance each other's effect on the likelihood of outward internationalization.

Investment opportunity set, political connection and business policies of private enterprises in China

The main purpose of this paper is to examine the factors that determine the business policies of private enterprises in the People’s Republic of China. Little is known about these private enterprises although these are surpassing the state-owned enterprises to become the most important corporate sector in China. The phenomenal growths of these enterprises provide an interesting setting to study the effect of the investment opportunity set (IOS) on business policies. We also examine how a firm’s political connection, generally believed to be instrumental to a firm’s success in transition economies, affects its business policies. We provide evidence on the importance of these factors in shaping the private firms’ business policies in China. More specifically, our results show that growth firms pay lower dividends, have lower overdue receivables relative to sales, have higher percentage of bonus shares, and are more likely to engage in joint ventures. In addition, firms with better political connection are able to borrow more, are more likely to establish a board of directors, and are more likely to acquire SOEs. These results have policy implications with regard to private enterprises in transitional economies in general and those in China in particular.

Empirical research on M&A performance of private enterprises in China

With the development of the security market and the growing power of the private enterprises, the M&A(Mergers and Acquisition) of private enterprises is becoming increasingly popular. This article selects the M&A cases in Shanghai and Shenzhen Exchanges from 2000 to 2001 and examines the performance of private enterprises pre- and post-M&A based on the financial index method and the event study method. The research reveals that the M&A performance is mixed in China. Meanwhile, the empirical research indicates that the stock market overreacts to the M&A events.

An Analysis of Causes of Failures in Expanding for Private Enterprises in China

An Analysis of Causes of Failures in Expanding for Private Enterprises in China

Analysis of Three-Dimensional Strategy for Enhancing Capability for Organizational Learning in Private Enterprises

The paper put forward a three-dimensional model of organizational learning in private enterprises, including organization system, private entrepreneurs and employees based on the analysis of the problems on organizational learning in private enterprises. Therefore, the research proposes several strategies, establishing learning organization, elevating professional qualities of private entrepreneurs and carrying out human-based management to enhance the capability for organizational learning in private enterprises in China.

Empirical study on commonness of fast growing private enterprises in China

PurposeThe paper aims to examine the similarities of fast‐growth private enterprises (PEs) in China with particular focus on enterprises listed on growth enterprises market in order to draw managerial implications for other PEs.Design/methodology/approachThe paper looks at the release effects of intangible assets in PEs. It examines the excavation effects of preferential policy on PEs and goes on to discuss the agglomeration effects of the inherent advantages of these.FindingsThe paper argues that the fast growth of PEs in our sample was attributable to three main factors, i.e. benefits of intangible assets marketisation, shrewd use of government preferential policies and technological and managerial capabilities.Practical implicationsThis research calls for the Chinese Government to adjust relevant policies to create a fair and competitive environment for enterprises with different ownerships and different scales.Originality/valueThe paper highlights the fact that the social and economic conditions of China in the post‐transition period have changed greatly and that the Chinese Government needs to clarify and define the existing characteristics and functions of enterprises and improve their service‐oriented functions.

What are the Sources of Financing of the Chinese Firms?

It appears to be common knowledge that external financing in China is mostly limited to state-owned firms and is hard to obtain for smaller private firms. In this paper we take a closer look at internal and external, formal and informal, financing sources of Chinese firms during the period of rapid economic reform in 1997 – 2006. To this end we analyze balance-sheet data from Chinese Industrial Surveys of Medium-sized and Large Firms for 2000-2006 and survey data from the Large-Scale Survey of Private Enterprises in China that was conducted in 1997, 2000, 2002, 2004, and 2006.The following stylized facts emerge from our analysis: (1) State-owned firms continue to enjoy significantly more generous external finances than other types of Chinese firms; (2) Chinese private firms have resorted to various ways to overcome financial constraints, including increasingly more mature informal financial markets, cost-saving through lower inventory and other working capital requirements, and greater reliance on retained earnings; (3) There are substantial variations in financial access among private firms: While the small private firms face more financial constraints, the more established large private firms seem to have access to finances that are more equal to their SOE counterparts; and, (4) There is some evidence that financial access of small private firms, especially to formal bank loans, has improved moderately in the past decade.

China as a Regulatory State

Market economy models differ in the degree of the power of the government vis-a-vis the market in the economy. Under the classications set forth by Glaeser and Shleifer (2002, 2003), and Djankov et al. (2003), these market models range from those emphasizing low government intervention in the market (private orderings and private litigation through courts) to those where the state is an active participant (regulatory state). This paper, using data from a survey of 3,073 private enterprises in China, constructs an index to quantify the power of the government vis-a-vis the market. Regional government power is found to vary considerably across China's regions. Notably, enterprises located in regions where government exerts more power in the market perform better, suggesting that the regulatory state model of the market economy is appropriate for China.

The relationship between political resources and diversification of private enterprises: An empirical study of the top 500 private enterprises in China

This paper argues that the political resources owned by Chinese private enterprises affect their diversification strategy under the context of China’s transitional economy. Based on the sample of top 500 private enterprises in 2004 in China, we find the following empirical evidence: First, political resources owned by private enterprises are positively and significantly related to their degree of diversification. Second, the possibility for private enterprises to diversify their business by entering industries under government regulation is positively related to their political resources. Third, the possibility of related diversification for private enterprise is negatively related to its political resources.

The Revival of Private Enterprise in China

Contents: Introduction, Shuanglin Lin and Shunfeng Song Part I Private Enterprises and Economic Development: Higher efficiencies or resource reallocation?, Li Gan, Shunfeng Song and Chiu Tan Size of the state-owned sector and regional growth in China, Kerk L. Phillips and Shen Kunrong Resource allocation and economic growth in China, Shuanglin Lin. Part II Government and Private Enterprises: Government and private enterprises: Wenzhou experiences, Wenbo Wu Property rights developments and productivity gains in China: a law and economics perspective, Xiaowen Tian and Vai Io Lo Evolution of economic development: entrepreneurs, market, and the state, Jack W. Hou Private enterprise development and governmental functions, Jian He. Part III Financial Reforms, Openness, and Private Enterprise Development: Causes of the non-performing loan piling-up in the late 1990s: a research note, Ding Lu, Sandre M. Thangavelu and Qing Hu Public venture capital: understanding the US and Chinese experiences, Changwen Zhao, Shuming Bao and Chunfa Chen The challenges China's private enterprises face in the WTO, Shaomin Huang, Dongxia Wu and Grant D. Forsyth. Part IV Ownership Reforms and Privatization: The privatization of Russian state industry: some lessons for China, Marshall I. Goldman Politician control, agency problems and ownership reform: evidence from China, Lixin Colin Xu, Tian Zhu and Yi-min Lin Hospital ownership: what can China learn from the US experience?, Wei Yu. Part V Corporate Governance and Efficiency: Corporate governance and the development of private enterprise in China, Aimin Chen and Ping Li The productivity efficiency of the state-owned enterprises in China, Chun-Chien Kuo The prospect of private economy in China, Xiaowen Tian Index.

The Revival of Private Enterprise in China ‐ Edited by Shuanglin Lin and Shunfeng Song

<i>The Revival of Private Enterprise in China</i> ‐ Edited by Shuanglin Lin and Shunfeng Song

Property Rights Protection and Allocation of Investment: Evidence from China's Private Firms

Property rights protection has been found to promote economic growth at the macro level, and affect the incentive for investment at the micro level. What is not clear is whether and how property rights protection affects a firm's allocation of investment across industries for a given size of investment. In this paper, using a survey data set of private enterprises in China, we find that weaker property rights protection causes firms to invest in a wider range of industries. We then explore several possible channels through which property rights protection may affect the allocation of investment across industries.

Multinationals, Access to Finance and the Exports of Private Firms in China

Using a rich panel data set, we provide a rigorous analysis of the relationship between access to external finance, foreign direct investment and the exports of private enterprises in China. We conclude that, in order to foster the exports of indigenous enterprises, the elimination of financial discrimination against private firms is likely to be a more effective policy tool than the reliance on spillovers from multinational firms.

Investment Opportunity Sets, Relationship Endowments and Business Policies of Private Enterprises in China

Investment Opportunity Sets, Relationship Endowments and Business Policies of Private Enterprises in China

ON THE FINANCIAL PERFORMANCE OF PRIVATE ENTERPRISES IN CHINA

Using the comprehensive 2000 and 2002 surveys of Chinese entrepreneurs conducted by the National Association of Private Entrepreneurs and the Chinese Academy of Social Sciences, we examine the characteristics and financial performance of private enterprises in China. Entrepreneurs, on average, are 40 years old and many are well-educated; more than one-third of them have a college degree or higher. Their companies are young, with an average age of six to seven years. Entrepreneurs contribute most of the equity capital to the private firms, which in general, are profitable with an average return on assets of 16 percent in 2002 and 11 percent in 2000. Further empirical analysis demonstrates the important impact of social, financing and human capital on firms' financial performance. We find that social capital (measured by charitable contributions), financing capital (measured by the equity-to-total capital ratio), and human capital have significant effects on firm profitability, and younger entrepreneurs tend to be more successful in the new Chinese market economy.

Comparison of Entrepreneurship Environment for Executives between State‐owned and Private Enterprises in China

AbstractThis research aims at exploring the differences in the effects of environment on entrepreneurship growth between state‐owned enterprises and private businesses. Through executive investigation, reasons are provided for better performance of private businesses. Environmental factors, including economic, legal, technological, cultural and social factors, which influence entrepreneurship growth, are examined to determine differences between state‐owned enterprise and private business executives. It is found that the methods of executive assignment to managerial posts determine executives’effort towards entrepreneurship.

Managing to Lead in Private Enterprises in China: Work Values, Demography and the Development of Trust

Previous work on trust has focused on employee trust in management. However, issues of how leaders develop trust in their followers in leader—member exchange (LMX) are under-explored. Based on theories of leader—member exchange, attribution and industrial convergence, this study investigates how the work values of leaders influence the development of their trust in followers and how this is moderated by demographic factors. A survey of 219 leaders was conducted in privately owned enterprises in China. The findings suggest that the work value of centralization is negatively related to leader trust in follower predictability. Group orientation and formalization are positively related to the development of trust in follower good faith. Moreover, age and level of formal education are found to moderate significantly the relationships between leader work values and development of their trust in followers within the context of China.