SOE Reform Research Articles

China's mixed-ownership reform and SOE profitability

The mixed-ownership reform has been the mainstream for the SOE reform in China, but rarely is known whether this reform can improve the overall profitability of SOEs. Therefore, this paper would like to fill this literature gap by testing the impact of China's ongoing mixed-ownership reform on SOEs profitability.This reform encourages private capital to purchase shares of SOEs, so it can be regarded as a privatization plan for SOEs. Using the Difference-in-Differences (DiD) approach, we treat SOEs undergoing the reform as the treatment group and those not undergoing the reform as the control group. Our results indicate that the reform significantly increases the profitability of reformed SOEs. Mechanism analysis suggests that the reform enhances SOE profitability by reducing redundant workers, administrative fees, and related-party transactions. We also find that the effects of the reform are heterogeneous, with greater impacts observed among SOEs in unregulated industries, local SOEs, and SOEs in areas with low marketization. Overall, our research enriches the literature on privatization and mixed-ownership reform, and also provides empirical evidence to promote mixed-ownership reform.

Research on the Influence of Strategic Adjustment on Enterprise Performance from The Perspective of Mixed Reform of State-owned Enterprises

In order to effectively solve the problems of low operation efficiency and rigid management system of state-owned enterprises, governments at all levels have actively implemented and practiced mixed ownership reform since 2016, trying to promote industrial optimization and upgrading through mixed reform and stimulate the internal development potential of state-owned enterprises. With the continuous development of the economy and society, the state adopted the three-year Action Plan for SoE Reform (2020-2022) in June 2020, giving guiding opinions and new requirements for further deepening the reform of soes. In this context, to help has not yet been mixed change of state-owned enterprises to better understand the concrete implementation process, Shanxi Fen Wine, for example, starting from the mixed change for, the enterprise mixed change in-depth after expanding brand depth, integrated marketing resources, strengthen scientific research innovation, innovation product strategy, optimize the governance structure of five strategic adjustment direction, and the strategic adjustment of influence on enterprise performance. Finally, it draws enlightenment from the three aspects of path selection of mixed reform, advantage utilization of mixed reform and control of strategic direction, which provides reference for the strategic adjustment of mixed reform of state-owned enterprises in the industry. The research found that Shanxi Fen Wine combined with the advantages of mixed reform and made strategic adjustments around the five aspects of brand, marketing, scientific research, product and governance, which had a positive and positive impact on the financial performance of enterprises.

Corporate governance matters: How do reduced state-owned shares lower firms’ market power in a developing country?

Corporate governance refers to certain approaches by which a company's stakeholders can receive a return on investment, one of which is to solve the agency problems that can arise from the separation of ownership and control. However, the basis for effective corporate governance is that the country has a mature modern corporate institution. The question of whether corporate governance can be effectively applied in firms in developing countries remains unclear. This study explores the influence of corporate governance in developing countries in the early stage of establishing a modern corporate institution. We use incremental job loss cost and agency cost reduction to represent the two consequences of corporate governance. Our estimates confirm a negative relationship between reduced state-owned shares and state-owned enterprises' (SOEs) market power and reveal the mediating effect of corporate governance on this negative relationship. Reduced state-owned shares can influence corporate governance and reduce agency costs. We also provide novel findings indicating that what really makes SOEs' market power decrease is the cost of job loss; however, we determine that the decline of market power is not necessarily a negative consequence as reduced state-owned shares can significantly promote the performance of SOEs by reducing market power. Our conclusions remain robust following a series of endogeneity tests. The study sheds new light on corporate governance by examining the relationship between corporate governance, SOE reform and employee welfare costs for the first time.

Non-State Shareholder Participation and Technological Innovation in State-Owned Enterprises

The Third Plenary Session of the 18th CPC Central Committee established mixed ownership system as the main policy of SOE reform, and as the main form of SOE "mixed reform", can non-state shareholders' participation promote the technological innovation of SOE? Based on the research samples of China's A-share state-owned listed companies from 2010 to 2017, this paper finds that the participation of non-state shareholders promotes the technological innovation of SOE, and this result is more robust when the participation of non-state shareholders exceeds 10%, i.e., when the participation of non-state major shareholders is more robust. The results of the mediation effect model show that non-state shareholders' equity participation plays a positive role in the level of state-owned technological innovation by improving the incentive channel for executive compensation, while the results of the mediation effect test of the financial assets investment channel are not verified. This paper provides theoretical and empirical support for the rationality and effectiveness of mixed ownership reform from the dimension of technological innovation.

How can the participation of private enterprises promote the high-quality development of state-owned mixed enterprises?

The participation of private capital in the mixed ownership reform of SOEs is an important measure to maintain and increase the value of state-owned assets. From the theoretical perspective of sharing economy, this paper uses Chinese data to study the impact of private enterprise participation on the high quality of state-owned mixed enterprises. This paper draws the following conclusions: (1) The participation of private enterprises can significantly improve the development quality of state-owned mixed enterprises, and this conclusion is also valid after dealing with the endogenous problem of the model. (2) The empirical results of profit-sharing heterogeneity show that when SOEs are willing to share their profits with private enterprises, private enterprises may show high vitality, which has a more obvious effect on improving the development quality of state-owned mixed enterprises. Therefore, in the process of reform, SOEs should be encouraged to transfer part of their profits to private enterprises, and at the same time, efforts should be made to create a good environment for the development of private enterprises, so that private entrepreneurs can fully stimulate their own entrepreneurial spirit.

Study on the Impact of Private Enterprises' Participation in the Mixed Reform of State-owned Enterprises on the Value Preservation and Appreciation of State-owned Assets

State-owned listed companies in the commercial category in Shanghai and Shenzhen A-shares from 2013 to 2020 were selected as the research sample. Data related to the shareholding and delegated behavior of private shareholders among the top ten shareholders are utilized. Using a fixed-effects model, we empirically analyze the impact of private companies' participation in the mixed reform of state-owned enterprises on the value preservation and appreciation of state-owned assets at the equity level and the management right level. Explore the moderating effects of internal control and the level of market-oriented development on the above relationships. The study shows that the participation of private enterprises in the mixed reform of SOEs can effectively contribute to the value preservation and appreciation of state-owned assets, both at the equity level and at the management level. Meanwhile, the level of internal control of SOEs has a significant positive moderating effect on the relationship between the participation of private firms in SOEs' mixed reform and the value-added of SOEs' assets; The participation of private firms can effectively compensate for the impact of insufficient market development on the value-added of SOEs' assets.

The State-Owned Enterprises of China: Reform Process

In 1978 China promulgated national policy, Reform and Opening. Chinese economy began transformation. Social market economy with Chinese characteristics was established replacing plan economy and had been improved continuously in 40 years. During the process of Reform and Opening, the State-Owned Enterprises as backbone of Chinese economy had also experienced a lot of changes. After the establishment of market, some SOEs was granted autonomy, and some SOEs experienced privatization or merger and acquisition. Now Chinese SOEs are divided into commercial SOEs and strategical SOEs. Their size is getting bigger and financial performance is improved continuously. However, SOEs are still facing many problems. The reform of SOEs still has a long way to go. Therefore, this article mainly describes the reform process of China's state-owned enterprises, the problems faced at each stage, and the current reform direction.

Reluctant Entrepreneurs: Evidence from China's SOE Reform

Reluctant Entrepreneurs: Evidence from China's SOE Reform

Government policy and land price dynamics: A quantitative assessment of China’s factor market reforms

This paper examines the role played by government policy regarding factors of production in shaping the dynamics of a growing economy. Using land as an example of an important productive factor, we develop a quantitative model with endogenous land price policy regimes to incorporate the regime switch observed in China from dual-track land pricing to land price discrimination by use. Our model also captures the following three economic reforms in China: introduction of non-SOEs (state-owned enterprises); reform of SOEs characterized by their retreat from the competitive manufacturing sector and the establishment of state monopolies in factor markets around 2000. We calibrate our model to match key economic indicators for China and quantify the effects of these reforms. Our calibrated model is consistent with several stylized facts for China after 2000 such as widening disparity in land prices by use, rapid growth in housing price, land revenue, and government expenditures on public goods, and the steep decline in labor share for income.

Monitoring and Evaluation for Education and Accountability in Edmund Rice Foundation Australia Nairobi County

Purpose: This study examined the relationship between corporate governance attributes and performance of state-owned enterprises through review of literature. The study specifically sought to establish the relationship between corporate governance attributes of accountability, transparency, transformational leadership and stakeholder engagement; and performance of state-owned enterprises with government policy objective as the mediating variable. The study was anchored on Agency, Signalling, Transformational Leadership and Stakeholder Theories to narrow the literature gap.
 Methodology: The study adopted desk research design through reviewing of relevant literature relating to corporate governance attributes and performance of state-owned enterprises. The study also summarized major contributions of significant studies on the relationship between corporate governance and performance. In addition, the study discussed the theoretical and methodological gaps in the reviewed literature on corporate governance and performance for further research.
 Findings: Reviewed primary and secondary literature sources showed that, more transparency allows for greater accountability and contributes to better performance by state-owned enterprises. Further, countries that have been able to improve their corporate governance standards and practices have also been able to improve the business environment for and performance of both private and state-owned companies. In addition, SOEs’ performance is influenced by adoption and implementation of corporate governance practices. However, the difference in financial performance of SOEs may be due to several factors including set government policy objectives that constrain the performance of the SOEs. Moreover, countries with ineffective governance and low accountability continue to experience weak SOE performance, poor delivery of public services, stifled competitiveness and growth including through the crowding-out of private companies and increased opportunities for political patronage and corruption.
 Unique contribution to theory, practice and policy: The study recommended that the principal objective of SOE reforms should be to improve SOEs’ accountability and efficiency by establishing and enforcing adequate reporting of their performance while holding them accountable for reaching or their targets. In addition, the state ownership policy should fully recognize SOE’s responsibilities towards stakeholders and request that SOEs report on their relations with stakeholders. Further, it should make clear any expectations the state has in respect of responsible business conduct by SOE.

The influence of state-owned enterprise reform on enterprise innovation: new evidence from China

ABSTRACT The leading group of the State-owned Enterprise Reform of the State Council of China launched a three-year Double Hundred Action for state-owned enterprises in 2018. This study empirically examines the effect of the Double Hundred Action from the perspective of innovation investment using a sample of state-owned listed enterprises from 2013 to 2020. The study finds that the Double Hundred Action significantly improves the innovation investment of state-owned listed enterprises. Furthermore, our main results are more pronounced for firms with competitive industries, a low ratio of independent directors, and auditors not belonging to the ‘Big Four’. This study explores the factors influencing corporate innovation from the new perspective of the Double Hundred Action, and also enriches the study of the economic consequences of SOE reforms. This study provides empirical evidence of the positive effects of SOE reforms in emerging markets and has important policy implications for deepening the governance of SOEs.

Financial repression, SOE reform and fiscal-monetary policy coordination

We build a dynamic stochastic general equilibrium (DSGE) model with financial repression and conduct estimation and simulation with it using aggregate data. We discuss the interaction and optimal combination of fiscal and monetary policies when the model features SOE monopoly and financial repression. We find that under current situation, fiscal policy should play a bigger role in stabilizing output, while monetary policy ought to pay more attention to combatting inflation. Although private firms' limited access to credit can be attributed to financial repression and SOE monopoly, financial repression is a second-best policy, in that it promotes SOE's output via cheap credit when SOEs behave like monopolists. This offsets the efficiency loss associated with monopoly. Moreover, our policy experiments show that the optimal fiscal policy can respond less to output fluctuations, when SOE reforms dampen the significance of financial repression.

The history and present of Chinese SOE reform

The SOE reforms are pivot for Chinese economy. The future success of Chinese economy relies on the government’s ability to deepen SOE reforms today. Over forty years of SOE reforms have mitigated the unanimity problem, improved SOE efficiencies, and elucidated the relationship between SOE and the government. Even though misallocation, excessive social burdens, and bureaucratic culture within SOEs still exist, this reform has achieved staged success. The success originates from a strong and consistent government leadership, but future reforms can also go astray because of the overly centralized power. This paper summarizes the overview of China's planned economy and analyzes the reform measures of the leaders in different periods respectively.

Firm Ownership Changes and Tax Compliance: Evidence from China's SOE Reform

Firm Ownership Changes and Tax Compliance: Evidence from China's SOE Reform

Broken 'Iron Rice Bowls' and Shattered Communist Fairy Tales: SOE Reform and Political Distrust in China

Broken 'Iron Rice Bowls' and Shattered Communist Fairy Tales: SOE Reform and Political Distrust in China

The effect of firm performance on CEO compensation: the moderation role of SOE reform

The effect of firm performance on CEO compensation: the moderation role of SOE reform

State Role And Securities Market Development In Uzbekistan

In the Uzbekistan capital market, the state has a significant role as regulator and principal shareholder. The state actively participates in the capital market through its SOEs and banks that issue, own, manage various securities, and render intermediary services in the financial market. As well as the state sets rules to regulate market relations through authorized bodies that are also responsible for the fairness of dispute resolution. Consequently, a high level of direct and indirect state participation in securities market relations suggests the prevalence of general administrative principles over market principles. In such conditions, one of the main tasks of implementing market principles in the securities market and improve equity financing would be to reduce state share and administrative methods. Thus, it is necessary to hold extensive and comprehensive reforms underpinned by sound theory to get proper understanding and direction. In this regard, this chapter provides an outline of the theoretical bases of state participation in the economy, an overview of the state’s role and the extent of state ownership, an analysis of the main SOE problems, and provides perspectives of future SOE reforms in selected CIS countries.

Opportunities of EU-China Comprehensive Agreement on Investment for China

The European Union is the most important region for China’s FDI outside of Asia, while the Chinese market has been increasingly important for EU’s trade and investment as well. Therefore, China and EU proposed a Comprehensive Agreement on Investment (CAI) in 2013 to better regulate bilateral investment activities and concluded it at the end of 2020. On the basis of the springboard theory, the CAI can bring some opportunities for China. Firstly, China can seek advanced technologies and talents from EU to further build its core competitiveness and meanwhile, more Chinese capital has been allowed to enter the EU’s market. Secondly, the regulations and standards of the CAI contribute to the systematic reform of SOEs in China as well as the promotion of standardized operation and social responsibility of Chinese firms. Thirdly, it helps to enhance the innovation capabilities and upgrade the industrial structure of China. However, the CAI was not approved by the European Parliament in May 2021, so its final ratification still faces lots of difficulties.

SOEs Privatization Policy in Korea: Lessons for the Vietnamese Economy

The economic structure of Vietnam seems very different from that of Korea. One is a socialistic economy, and the other is a capitalistic market economy. However, from the 1990s, Korean national economic power was concentrated on Chaebol, and SOEs played significant roles in the domestic economy. As a result, there were intimate relationships among major private companies, SOEs, and political elites. Vertical industrial structures had been too tightly intertwined, and these were partly responsible for the 1997 financial crisis in Korea. SOEs in the Vietnamese economy have played significant roles and substantial expenditures of infrastructure were spent to grow steadily; thus, there is a possibility that general governments and SOEs face fiscal constraints. Therefore, SOE reform and privatization are in top prioritized policy options. Reform in management and economic structure as well as reform in administrative implementation should be closely scrutinized to achieve effective SOE reform. In the process, the government should actively manage the progress of SOE reform including privatization by strengthening its role as a big shareholder. The experience of Korea during the 1990s and 2000s for privatization, especially for Korea Telecom case, could draw essential lessons to the Vietnamese economy. Strategy and implementation sequence, political moment utilization, and efficient administrative architecture are critical success factors.

Taming SOEs within a Redefined Competition Policy Framework: An Alternative Approach for Consensus?

With the growing concern of the international community about the negative spillover effects of SOEs on trade, reaching a consensus among different stakeholders has become increasingly urgent. This paper argues that strengthening a redefined competition policy is a feasible alternative, or at least a complementary option to the existing trade framework. The reasons are as follows: (a) surrounding SOEs is not only trade-related, but also competition-related; (b) the existing SOE disciplines have defects when it comes to dealing with competition distortion effects; and (c) characteristics of competition policy make it easier to reach a “maximum common divisor” among all parties. Accordingly, competition policy needs to be redefined and pursued from an international and domestic level. It is necessary to strengthen the fundamental position of competition policy in China by integrating it into SOE reform measures, advancing the implementation of the Fair Competition Review System, and promoting the construction of the competitive neutrality system.