Private-owned Enterprises Research Articles

Disclosure for whom? Government involvement, CSR disclosure and firm value

This paper investigates the roles of market and government in an emerging economy. By examining 2906 CSR reports from Chinese listed firms, we find that CSR disclosure adds incremental value to firms, especially for Private-Owned Enterprises (POE). We also find that the disclosure saves Central Government Controlled State-Owned Enterprises, which mandatorily disclose CSR information, from negative news report and litigation risks. This insurance effect is significant in POEs only when they suffer from economic losses. We find that POEs are market-oriented; although government would compensate for other mandatory disclosure firms when they suffer from reputational shock.

The Antecedent and Outcome Variables of Global Mindset: A Comparative Study of State- and Privately-Owned Enterprises in China

The Antecedent and Outcome Variables of Global Mindset: A Comparative Study of State- and Privately-Owned Enterprises in China

The impact of state-owned enterprises on the employment growth of manufacturing in Chinese cities: Evidence from economic census microdata

This article utilises economic census microdata to examine the impact of state-owned enterprises (SOEs) on the employment growth of manufacturing industries in Chinese cities between 2004 and 2008. The main findings show that the presence of SOEs inhibits employment growth in the manufacturing industry. Using the historical landscape of SOEs as an instrumental variable, our findings underscore that the overall impact of SOEs remains negative. This study then explores three potential mechanisms underlying this negative relationship. First, SOEs appear to have no significant impact on knowledge spillovers in their own industry. Second, SOEs tend to hinder the entry of new privately-owned enterprises (POEs) into the marketplace. Third, SOEs are generally less productive than POEs. The article also provides new evidence about dynamic externalities theory: the employment growth rate of manufacturing industries is higher in cities, with a substantial number of rivals in their own industry.

Does M&A Financing Affect Firm Performance under Different Ownership Types?

Mergers and acquisitions (M&A) are an essential way for enterprises to achieve sustainable development. As large sums of money are typically involved in M&A transactions, financing is a vital factor in outcomes. This study examines the relation between equity and debt financing of M&A on subsequent performance, and the effect of ownership (state-owned enterprises versus private-owned enterprises) on M&A performance in China. We are motivated to examine the relation between financing methods and M&A performance in China because the differences in ownership, resource availability and policy support by the government for many firms may affect subsequent performance. Using a large sample of Chinese A-share listed companies between 2009 and 2016, we find that equity-financed M&A transactions lead to significantly better performance than debt-financed transactions. Equity-financed M&A transactions of state-owned enterprises (SOEs) perform significantly better as compared to debt-financed M&A, whereas equity-financed M&A transactions of private-owned enterprises (POEs) have little effect on their performance. This study extends our insights into the relation between M&A financing types and firm performance under different ownership types in the context of emerging markets.

Agglomeration, Absorptive Capacity and Knowledge Governance

This paper considers the role of firm ownership structure, absorptive capac-ity and agglomeration on firm innovation in the Chinese context. A popular co-occurrence measure is used to measure local spillovers expected to take place between similar but different industries co-located together. Relying on a large panel of Chinese firms, this paper offers three main results: (i) privately-owned enterprises (POEs) are more efficient innovators than their state-owned enter-prise (SOE) counterparts; (ii) local spillovers from related industries enhance firm innovation, especially for firms with higher pre-existing learning abilities; and (iii) despite possessing relatively high levels of absorptive capacity, POEs maintain higher innovation performance compared to their SOE counterparts. These findings help confirm the absorptive capacity thesis, but also suggest that possessing relatively higher levels of absorptive capacity, in and of itself, is not always a sufficient pre-condition for firms to overcome all of the cognitive and technological barriers to leveraging external sources of knowledge. In line with theories of knowledge governance, one explanation for this finding is that private (government) operators develop higher (lower) quality governance procedures that ultimately enhance (hamper) their ability to successfully integrate external sources of knowledge even after developing a high level of absorptive capabilities.

Party Building or Noisy Signaling? The Contours of Political Conformity in Chinese Corporate Governance

We examine responses by Chinese firms to a “party-building” policy launched by the Chinese Communist Party (CCP) in 2015 to reform China’s state-owned enterprises (SOEs). The policy requires SOEs to follow a model template of charter amendments to formalize and elevate the role of the CCP in their corporate governance. In the period 2015-18, about ten percent of publicly traded SOEs failed to follow the mandatory policy, while nearly six percent of privately owned enterprises (POEs) complied even though they were not subject to the policy. We find wide variation in the provisions adopted within and across firm ownership types, with SOE adoptions apparently affected by their ownership structures and exposure to capital market forces, and POE adoptions associated with political connections. Our findings highlight the complex contours of political conformity in Chinese firms and raise questions about the trajectory of Chinese corporate governance reform and foreign investment activity.

Internal Control and Crisis Management: Insights from State- and Privately-Owned Enterprises in Ghana

The paper examines the level of adherence to internal control measures and the relationship between internal controls and crisis management. Internal control, an essential tool for crisis management, has received less attention from scholars and practitioners in Ghana. The authors employed a survey and cumulative percentage research approach. Twenty enterprises from five sectors, namely: transport, service, energy, financial, and manufacturing, with 120 respondents from both state- and privately-owned enterprises in Ghana, were used in this study. The results indicate that less than a quarter of the respondents agree that both state- and privately-owned enterprises perform excellently in adhering to the 2013 COSO internal control model. However, the performance of privately-owned enterprises is better than that of state-owned ones. The study also finds a weak positive correlation between internal controls and crisis management in both state- and privately-owned enterprises in Ghana. The study recommends internal controls to be taken seriously with special attention on board members and management’s appointment, which should be based on their competence rather than political and other social ties. The authors conclude that an effective internal control system is crucial for overcoming a crisis in organizations.

Investor Sentiment, Institutional Investors and Corporate Innovation Investment <br/>—Evidence with Different Ownership Structure from China

This paper investigates the relation between investor sentiment and firm innovation investment in China, and explores the intermediary role of institutional investors. We find that the impact of investor sentiment on innovation investment is quite different between state-owned enterprises (SOEs) and private-owned enterprises (POEs). Investor sentiment promotes the innovation investment of POEs, while inhibits SOEs. We also find that institutional investors play a positive intermediary facilitating role in POEs, mainly contributing by supervisor independent institutional investors. We do not find any role for institutional investors in SOEs.

The Impact of Social Insurance Contributions on Firms Employment and Wages: Evidence from China Employer-Employee Matching Survey Data

Using China Employer-Employee Matching Survey (CEES) data from 2014 to 2016, this study examines the influence of social insurance contributions on the levels of employment and the wage levels in Chinese firms. We construct three indices of social insurance enforcement: the city contribution rate (CCR), the rate of city enforcement of social insurance (CE), and the firms? actual contribution rate (FAR) to employ an empirical study. The new findings are as follows. First, those firms in regions with high city contribution rates or a high rate of city enforcement of social insurance are likely to employ more workers. A bipolarization phenomenon is found in the relation between the firms? actual social insurance contributions and the adjustments to levels of wage and employment. Second, the impact of social insurance contribution on firms? level of wages and employment differ by firms? ownership types, in response to the increased social insurance burden, privately-owned enterprises are more likely to reduce wage levels than the state-owned enterprises.

Towards a framework to understand the relative performance of state-owned firms

This paper considers the factors influencing the comparative performance of state-owned and privately-owned enterprises (SOE/POE). The economics literature has argued that firm performance is influenced by governance arrangements, leading to expectations of inferior performance from SOEs. Meanwhile, a political economy literature classifies countries according to the model of state engagement, which also has implications for SOE performance. We combine these two frameworks to provide a taxonomy. The first framework relating to governance concerns the relationship between owners and managers, the relationship between large and small owners, and the functioning of the managerial labour market. The second framework considers three types of model of state engagement: the Welfare State, the Developmental State, and the Predatory State. Each of the six resulting taxonomies yields distinct outcomes in terms of SOE versus POE performance. In all models, SOEs perform better in a better governance environment than in a worse governance environment, and this ranking is the same in Welfare States and Predatory States. However, in Developmental States with strong governance, SOEs may outperform POEs if they can benefit from superior state resources.

Is it possible to escape? Local protectionism and outward foreign direct investment by Chinese privately-owned enterprises

This study explores the impact of local protectionism on outward foreign direct investment (OFDI) and how firms respond to local protectionism in a transition economy. We find that local protectionism exerts a negative effect on the OFDI decisions of Chinese privately-owned enterprises (POEs). However, this negative impact is weakened by POEs’ corporate philanthropy strategy, whereas corporate political activity reinforces such an impact. This research extends the lens of institutional escapism by highlighting local protectionism as a barrier to OFDI and provides new insights into how firms respond to the subnational environment by adopting various nonmarket strategies.

Political Influence and Corporate Governance: Evidence from Party-Building Reform in China

We focus on the recent Dangjian (“party-building”) reform, a major measure taken by the Chinese Communist Party (CCP) to strengthen its leadership position in Chinese state-owned enterprises (SOEs). We hypothesize that, given the unique governance and ownership structure of Chinese firms, there is a trade-off between the political costs and benefits of the mitigated agency problems. We report negative investor reactions to privately-owned enterprises (POEs) after the Dangjian reform announcements, consistent with the hypothesis that strengthening party control over business is harmful to business efficacy and firm value. We also find evidence that the increased risks of political influence due to the reform undermine the value of SOEs that are considered more independent of political power (i.e., those under corporate pyramids or cross-listed on a foreign market). In addition, the market reacted negatively when firms incorporated the provision to adopt the party’s cadre management principle, which allows the CCP to intervene in firm management.

Performance feedback and firms’ R&D frequency: a comparison between state-owned and private-owned enterprises in China

R&D investments are an important precursor to innovation and ultimately affect a firm’s long-term performance. Prior research has treated R&D expenses as static over time, but over the last few years, scholars have switched to a more dynamic perspective of R&D investment. Using data from Chinese listed manufacturing firms, this study investigates the influence of performance feedback on R&D investment frequency, and further explores how that influence differs in SOEs and POEs. These results provide insight into the dynamics of firms’ R&D investment, which can help decision-makers properly stimulate firms’ R&D investments in China’s emerging economy.

The Effect of Corporate Political Connections on Tax Aggressiveness

This study examines whether corporate political connections influence tax aggressiveness in state-owned enterprises and private-owned enterprises in Indonesia. The observation period is 2015 to 2017. The population taken is a state-owned enterprise and a non-financial sector private sector business entity with 327 companies with a period of 3 years. Then the determination of the sample using a purposive sampling method used a sample of 148 companies. The results of this study indicate that the existence of political connections in state-owned enterprises and private-owned enterprises has a significant positive effect on tax aggressiveness.

ANALYSIS OF THE OCCUPATIONAL MORBIDITY AMONG WORKING-AGE WOMEN

Introduction. Female employees composing of 49% of the total engaged population, work in conditions that do not meet sanitary and hygienic standards, which lead to impaired health and reducing working longevity. The purpose of the study is to analyze the occupational morbidity (OM) of the female population employed in the main industries of the Irkutsk Region. Material and methods. The analysis of the OM for 2006-2018, working conditions of female workers of the Irkutsk Region was carried out. The alignment of the dynamic range was used for OM analyzing. The results are presented by intensive and extensive variables, average, and minimum and maximum values. Results. Three time periods of the OM level formation were established: growth (2006-2010), stagnation (2011-2014) and decrease (2015-2018). During the growth period, infectious diseases (27.6%), respiratory diseases (19.5%), and organs of hearing (18.9%) prevailed in the OM structure in women. On the background of the OM indices decrease, a statistically significant increase in respiratory diseases, vibration disease, and infectious diseases, and also an increase of the occupational diseases’ share among women employed in the processing of woods, production of aircraft, and metallurgical industry is observed. The largest number of OM cases is registered at the privately-owned enterprises - 46.4 [32.3-73.3] %. Conclusion. OM dynamics are characterized by a significant decrease, however, an increase in the proportion of occupational diseases registered in women among all newly detected cases. Women employed in health care, wood processing, ship and aircraft manufacturing, metallurgy, power generation, transmission, and distribution are most at risk of developing occupational diseases. The current situation is a consequence of the long accumulation and unresolved problems of ensuring safe working conditions and requires the adoption of systemic measures aimed at the preservation of women’s health.

The determinants of adjustment speed of board structure: evidence from Chinese listed companies

Using data from China’s publicly listed companies, this study investigates how firms adjust their board structure in China. We observe that between 2007 and 2013, 45% of firms changed the size or the independence of their boards during a given 2-year interval. We also find that the companies frequently adjust their board structure toward a target board structure. Based on agency theory and resource dependency theory, we have developed a novel trade-off framework between and within a board’s monitoring and advisory functions to examine the dynamic adjustment of board structure in China. The board adjustment is asymmetrically determined by both monitoring-driven adjustment and by advisory-driven adjustment. For state-owned enterprises (SOEs), a change of board independence is directed more by monitoring-driven than by advisory-driven adjustment, whereas for privately owned enterprises (POEs) such change is propelled less by monitoring-driven than by advisory-driven adjustment. For SOEs, a change in board size is influenced more by advisory-driven than by monitoring-driven adjustment, while for POEs it is affected less by advisory-driven than by monitoring-driven adjustment. The findings offer insight into the dynamic adjustment of board structure in China’s emerging economy, where companies achieve economic efficiency in response to their environment.

Green or nongreen innovation? Different strategic preferences among subsidized enterprises with different ownership types

Abstract Governments often turn to subsidies to boost enterprises’ innovation activities, which gives subsidized enterprises room for allocating the subsidies among different innovation activities. Taking insights from institutional logic theory, this paper proposes that enterprises exhibit different subsidy-allocation behaviors between nongreen and green innovations and that the positive effect of subsidies on nongreen innovation is greater than that on green innovation due to the double-spillover problem that is pertinent to green innovation. Further, this paper argues that innovation intensity varies from privately-owned enterprises to local and central state-owned enterprises and that the underlying reason for this phenomenon is that enterprises with different ownership structures behave with different institutional logics, face different environmental and innovation pressures, and hold different innovative resource and capability endowments. We test these hypotheses by using longitudinal data (2010–2015) on 175 publicly-traded firms in the pharmaceutical industry in China. Overall, the results support most of the hypotheses.

Agglomeration, absorptive capacity and knowledge governance: implications for public–private firm innovation in China

ABSTRACT This paper considers the role of firm ownership structure, absorptive capacity and agglomeration on firm innovation in the Chinese context. A popular co-occurrence measure is used to measure local spillovers expected to take place between similar but different industries co-located together. Relying on a large panel of Chinese firms, this paper offers three main results: (1) privately owned enterprises (POEs) are more efficient innovators than their state-owned enterprise (SOE) counterparts; (2) local spillovers from related industries enhance firm innovation, especially for firms with higher pre-existing learning abilities; and (3) despite possessing relatively high levels of absorptive capacity, POEs maintain higher innovation performance compared with their SOE counterparts. These findings help confirm the absorptive capacity thesis, but also suggest that possessing relatively higher levels of absorptive capacity, in and of itself, is not always a sufficient precondition for firms to overcome all the cognitive and technological barriers to leveraging external sources of knowledge. In line with theories of knowledge governance, one explanation for this finding is that private (government) operators develop higher (lower) quality governance procedures that ultimately enhance (hamper) their ability to integrate successfully external sources of knowledge, even after developing a high level of absorptive capabilities.

Regional economic empowerment through oil palm economic institutional development

Purpose The purpose of this paper is sixfold: first, to know the ability of area carrying capacity to the development of downstream oil palm industry; second, to know the potential for the development of downstream oil palm industry in efforts to improve the community through employment and business opportunities in the regions; third, to find eco-friendly institutional arrangement strategies of oil palm farming in order to spur economic growth and development; fourth, to formulate strategies for potential environmental impact as a result of institutional arrangement and development of downstream oil palm industry, both in regional and national scope; fifth, to predict the economic multiplier effect as impact of institutional arrangement and development of oil-palm-based downstream industry; and sixth, to include production centers and development areas of oil-palm-based downstream industry in potential areas. Design/methodology/approach Research location was in potential areas of oil palm plantation development, either in the form of plasma through state-owned enterprises (BUMN) and private-owned enterprises (BUMS), or in the form of self-supporting by community. The research locations were divided into two parts, namely the land area and the coastal area. The land area of Riau consisted of Kampar, Rokan Hulu and Kuantan Singingi Regency, while the coastal area of Riau consisted of Pelalawan, Siak, Bengkalis, Indragiri Hilir, Indragiri Hulu and Rokan Hilir Regency. Both research areas had different productivity which was caused by differences in soil fertility. The required data were primary and secondary data. Findings Plantation activities have increased the mobility of goods in the villages, causing plantation activities to also open business and employment opportunities for people who are able to accept these opportunities. Since post-1998 crisis, the growth of oil palm plantation area in Riau increased sharply, namely in 1998, the area of oil palm plantations was 901,276 ha, in 2012, 1,119,798 ha and increased to 2,103,175 ha at the end of 2017. Through economic activities that produce goods and services required during the plantation process and the development, downstream industries will have backward linkages. The development of oil palm plantations in Riau has had an impact on economic activities in rural areas. The result of the research in the field is that the average income of farmers in the plantation subsector (especially oil palm) is Rp4,576,696 per month or $5,781.09 per year. The impact on investment in the estate subsector has been felt by rural communities. This condition also affects the purchasing power of the people, resulting in the increase of mobility of goods and people. During the period 2009–2016, rural communities enjoyed a high level of prosperity. During this period, the price of fresh fruit bunch at the farm level was quite profitable. On the other hand, the production of the plantation area also increased compared to the previous period. The impact of rising prices and increasing production of farmers is that the farmers’ welfare index in the countryside had a positive value of 0.43. This index showed the increase of farmers’ welfare from the previous period by 43 percent. Originality/value There are few previous studies which have comprehensively and specifically reviewed the regional economic empowerment through institutional arrangement and development of oil-palm-based downstream industry. The development of oil palm plantations aims to eliminate poverty and underdevelopment, especially in rural areas. In addition, it also pays attention to equity. In broad sense, agricultural development which is based on plantations aims to improve the welfare of the community so that there is a change in the pattern of life of the surrounding community. On the other hand, the success of plantation development that is based on oil palm agribusiness is expected to reduce income inequality between community groups and between regions.

Clans, entrepreneurship, and development of the private sector in China

This paper examines the role of clans in China's unprecedented development of the private sector. Although with no well-developed financial and legal systems, China witnesses a boom of private sector, which has contributed to most of its economic growth during the past three decades. Using inter-census population survey and economic census data, I find that the clan is positively associated with the likelihood of entrepreneurship and the share of economy in the private sector. Exploring possible mechanisms, I find that the clan helps privately-owned enterprises overcome financing constraints and escape from local government's “grabbing hand”. In addition, the clan is significantly related to a set of individual values, which are arguably relevant for private business. Finally, I find that the support of clans for private business is limited as clans deter private businesses from growing into large firms. The results also suggest that the role of clans reduces as formal institutions develop.