Politician Control, Agency Problems and Ownership Reform: Evidence from China

24 Pages Posted: 8 Jan 2005

See all articles by Lixin Colin Xu

Lixin Colin Xu

World Bank - Development Research Group (DECRG); World Bank - Development Research Group (DECRG)

Tian Zhu

Hong Kong University of Science & Technology (HKUST) - Division of Social Science

Yi-min Lin

Hong Kong University of Science & Technology (HKUST) - Division of Social Science

Multiple version iconThere are 3 versions of this paper

Abstract

Using data from a recent national survey on the ownership reform of state-owned enterprises in China, we study the effects of reducing politician control and agency problems on a number of reform outcomes. Taking into account the endogenous nature of the reform, we find that these outcome measures of the reform's success are positively affected by the lessening of politician control through increasing the firm's flexibility in labour deployment and by the mitigation of agency costs through the introduction of more effective corporate governance mechanisms such as one-share one-vote and shareholding-based board structure composition. Ownership structure also matters: relative to shareholding by the state, foreign ownership has a positive effect on reform outcomes; individual (mostly employee) shareholding has a negative or insignificant effect. Somewhat surprisingly, operating autonomy (excluding labour deployment flexibility) has a negative effect on firm performance, suggesting serious agency problems in the reformed enterprises.

Suggested Citation

Xu, Lixin Colin and Xu, Lixin Colin and Zhu, Tian and Lin, Yi-min, Politician Control, Agency Problems and Ownership Reform: Evidence from China. Available at SSRN: https://ssrn.com/abstract=645143

Lixin Colin Xu (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H Street NW
MSN3-311
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG) ( email )

1818 H Street NW
MSN3-311
Washington, DC 20433
United States

Tian Zhu

Hong Kong University of Science & Technology (HKUST) - Division of Social Science ( email )

Division of Social Science
Clear Water Bay
Clear Water Bay, Kowloon
Hong Kong

Yi-min Lin

Hong Kong University of Science & Technology (HKUST) - Division of Social Science ( email )

Division of Social Science
Clear Water Bay
Clear Water Bay, Kowloon
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
25
Abstract Views
1,641
PlumX Metrics