Corporate ownership, equity risk and returns in the People's Republic of China
Tóm tắt
A large body of literature has examined how managerial ownership affects corporate strategy and risk-taking. The present study extends this literature by investigating the effect of other forms of corporate ownership on a firm’s equity risk (measured as the volatility of a company’s stock returns) and stock returns in the People’s Republic of China (PRC) – an important emerging economy that is rich in various forms of corporate ownership. We find that the various types of corporate ownership appear to have important but different impacts on equity risk and returns. In particular, companies with more state ownership tend to have higher stock volatility and lower stock returns; in contrast, companies with more legal-person ownership tend to have lower stock volatility and higher stock returns. Foreign and managerial ownership are found to have little effect on firms’ equity risk and returns. These findings support the predictions of agency theory – for example, that state ownership increases agency conflicts in companies because bureaucrats and state agencies do not have the same economic incentives to maximize the value of firms. We believe that our study contributes to the international business literature on investment strategy and risk assessment in developing markets such as China, and as a result our findings could have important implications for international investors.
Tài liệu tham khảo
Adams, M., & Hillier, D. 2000. The effect of captive insurer formation on stock returns: An empirical test from the UK. Journal of Banking and Finance, 24 (11): 1787–1807.
Agrawal, A., & Mandelker, G. N. 1987. Managerial incentives and corporate investment and financing decisions. Journal of Finance, 42 (4): 823–837.
Amihud, Y., & Lev, B. 1981. Risk reduction as a managerial motive for conglomerate mergers. Bell Journal of Economics, 12 (2): 605–617.
Anderson, R. C., & Fraser, D. R. 2000. Corporate control, bank risk taking, and the health of the banking industry. Journal of Banking and Finance, 24 (8): 1383–1398.
Bai, C.-E., Liu, Q., Lu, J., Song, F. M., & Zhang, J. 2004. Corporate governance and market valuation in China. Journal of Comparative Economics, 32 (4): 599–616.
Belsley, D. A., Kuh, E., & Welsch, R. E. 1980. Regression diagnostics: Identifying influential data and sources of collinearity. New York: John Wiley.
Berkman, H., Cole, R., & Fu, J. 2002. From state to state: Improving corporate governance when the government is a large block holder, Working Paper, University of Auckland, New Zealand.
Booth, J., & Smith, R. 1987. An examination of the small-firm effect on the basis of skewness preference. Journal of Financial Research, 10 (1): 77–86.
Chang, E. C., & Wong, S. M. L. 2004. Political control and performance in China's listed firms. Journal of Comparative Economics, 32 (4): 617–631.
Chen, K. C. W., & Wang, J. 2004. A comparison of shareholder identity and governance mechanisms in the monitoring of listed companies in China, Working Paper, Hong Kong University of Science and Technology, Hong Kong.
Chen, K. C. W., & Yuan, H. 2004. Earnings management and capital resource allocation: Evidence from China's accounting-based regulation of rights issues. Accounting Review, 79 (3): 645–665.
Chen, C. R., Steiner, T. L., & Whyte, A. M. 1998. Risk taking behavior and managerial ownership in depository institutions. Journal of Financial Research, 21 (1): 1–16.
Chen, C. R., Steiner, T. L., & Whyte, A. M. 2001. Risk taking behavior and managerial ownership in the United States life insurance industry. Applied Financial Economics, 11 (2): 165–171.
Cho, M. 1998. Ownership structure, investment, and the corporate value: An empirical analysis. Journal of Financial Economics, 47 (1): 103–121.
Chung, K. H., & Charoenwong, C. 1991. Investment options, assets in place, and the risk of stocks. Financial Management, 20 (3): 21–33.
Comiskey, E. E., Mulford, C. W., & Porter, T. L. 1986. Forecast error, earnings variability and systematic risk: Additional evidence. Journal of Business Finance and Accounting, 13 (2): 257–265.
CSRC 2000. CSRC Database. Beijing: China Securities Regulatory Commission.
Cull, R., & Xu, L. C. 2005. Institutions, ownership, and finance: The determinants of profit reinvestment among Chinese firms. Journal of Financial Economics, 77 (1): 117–146.
Douma, S., George, R., & Kabir, R. 2003. Foreign and domestic ownership, business groups and firm performance: Evidence from a large emerging market, Working Paper, Tilburg University, The Netherlands.
Drew, M. E., Naughton, T., & Veeraragahavan, M. 2003. Assets pricing in China: Evidence from the Shanghai stock exchange, Discussion Paper No. 128, Queensland University of Technology, Australia.
Eisenmann, T. R. 2002. The effects of CEO equity ownership and firm diversification on risk taking. Strategic Management Journal, 23 (6): 513–534.
Fabozzi, F. J., Garlicki, T. D., Ghosh, A., & Kislowski, P. 1986. Market power as a determinant of systematic risk: A note. Review of Business and Economic Research, 21 (1): 61–70.
Fama, E., & French, K. 1992. The cross-section of expected stock returns. Journal of Finance, 47 (2): 427–465.
Fan, J. P. H., & Wong, T. J. 2004. Politically-connected CEOs, corporate governance and post-IPO performance of China's newly partially privatized firms, Working Paper, Chinese University of Hong Kong.
Froot, K. A., Scharfstein, D. S., & Stein, J. C. 1993. Risk management: Coordinating corporate investment and financing policies. Journal of Finance, 48 (5): 1629–1658.
Goldman Sachs. 2001. Capital markets transforming China. People's Daily (Overseas Edition), 30 June: 7.
Gompers, P. A., Ishii, J. L., & Metrick, A. 2001. Corporate governance and equity prices, NBER Working Paper 8449, National Bureau of Economic Research, Cambridge, MA.
Gul, F. A. 1999. Government share ownership, investment opportunity set and corporate policy choices in China. Pacific-Basin Finance Journal, 7 (2): 157–172.
Gul, F. A., & Zhao, R. 2000. Corporate governance and performance in Chinese listed companies, Working Paper, City University of Hong Kong.
Hill, N. C., & Stone, B. K. 1980. Accounting betas, systematic operating risk, and financial leverage: A risk-composition approach to the determinants of systematic risk. Journal of Financial and Quantitative Analysis, 15 (3): 595–637.
Himmelberg, C., Hubbard, R., & Palia, D. 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics, 53 (3): 353–384.
Jensen, M. C., & Meckling, W. H. 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3 (3): 305–360.
Kennedy, P. 1998. A guide to econometrics. Oxford: Blackwell.
Lee, C. F., & Forbes, S. W. 1980. Dividend policy, equity value, and cost of capital estimates for the property and liability insurance industry. Journal of Risk and Insurance, 47 (2): 205–222.
Lee, C. F., & Rui, O. M. 2000. Does trading volume contain information to predict stock returns? Evidence from China's stock markets. Review of Quantitative Finance and Accounting, 14 (4): 341–360.
Maddala, G. S. 1992. Introduction to econometrics, (2nd ed.) Englewood Cliffs, NJ: Prentice-Hall.
Morck, R., Schleifer, A., & Vishny, R. 1988. Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20 (1): 293–315.
Myers, S. C., & Majiluf, N. S. 1984. Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13 (2): 197–221.
Naser, K., & Wallace, R. S. O. 1995. Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong. Journal of Accounting and Public Policy, 14 (4): 311–368.
Newey, W., & West, K. 1987. A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55 (3): 703–708.
Pan, Y., & Chi, P. S. K. 1999. Financial performance and survival of multinational corporations in China. Strategic Management Journal, 20 (4): 359–374.
Peng, M. W. 2004. Outside directors and firm performance during institutional transitions. Strategic Management Journal, 25 (5): 453–471.
Peng, M. W., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43 (3): 486–501.
Peng, M. W., Tan, J., & Tong, T. W. 2004. Ownership types and strategic groups in an emerging economy. Journal of Management Studies, 41 (7): 1105–1129.
Poon, W. P. H., Firth, M., & Fung, H. G. 1998. Assets pricing in segmented capital markets: Preliminary evidence from China-domiciled companies. Pacific-Basin Finance Journal, 6 (3–4): 307–319.
Qi, D., Wu, W., & Zhang, H. 2000. Shareholding structure and corporate performance of partially privatized firms: Evidence from listed Chinese companies. Pacific-Basin Finance Journal, 8 (5): 587–610.
Rosenberg, M. 2004. Firm risk, investment, and employment growth. Journal of Economics and Finance, 28 (2): 154–185.
Roy, A., Walters, P. G. P., & Luk, S. T. K. 2001. Chinese puzzles and paradoxes: Conducting business research in China. Journal of Business Research, 52 (2): 203–210.
Saunders, A., Strock, F., & Travlos, N. 1990. Ownership structure, deregulation, and bank risk taking. Journal of Finance, 45 (2): 643–654.
Smith, C. W., & Stulz, R. 1985. The determinants of firms’ hedging policies. Journal of Financial and Quantitative Analysis, 20 (4): 391–405.
Smith, C. W., & Watts, R. 1992. The investment opportunity set and corporate financing, dividend and compensation policies. Journal of Financial Economics, 32 (3): 263–292.
Smith, K., Guthrie, J., & Chen, M.-J. 1989. Strategy, size and performance. Organization Studies, 10 (1): 63–81.
Staking, K. B., & Babbel, D. F. 1995. The relation between capital structure, interest rate sensitivity, and market value in the property-liability insurance industry. Journal of Risk and Insurance, 62 (4): 690–718.
Stulz, R. 2005. The limits of globalization. Journal of Finance, 60 (4): 1595–1638.
Sun, Q., & Tong, W. H. S. 2000. The effect of market segmentation on stock prices: The China syndrome. Journal of Banking and Finance, 24 (12): 1875–1902.
Sun, Q., & Tong, W. H. S. 2003. China share issue privatization: The extent of its success. Journal of Financial Economics, 70 (2): 183–222.
Thomsen, S., & Pedersen, T. 2000. Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 21 (6): 689–705.
Tian, G. L. 2001. State shareholding and the value of China's firms, Working Paper, London Business School, London, UK.
Vickers, J., & Yarrow, G. 1998. Privatization: An economic analysis. Cambridge, MA: MIT Press.
Wei, Z., Xie, F., & Zhang, S. 2005. Ownership structure and firm value in China's privatized firms: 1991–2001. Journal of Financial and Quantitative Analysis, 40 (1): 87–108.
Whidbee, D. A., & Wohar, M. 1999. Derivative activities and managerial incentives in the banking industry. Journal of Corporate Finance, 5 (3): 251–276.
Xu, X. N., & Wang, Y. 1999. Ownership structure and corporate governance in Chinese stock companies. China Economic Review, 10 (1): 75–78.
Yu, Q., Du, B., & Sun, Q. 2006. Earnings management at rights issues threshold: Evidence from China. Journal of Banking and Finance, 30 (12): 3453–3468.
Zou, H., & Adams, M. B. 2006. The corporate purchase of property insurance: Chinese evidence. Journal of Financial Intermediation, 15 (2): 165–196.
Zou, H., & Xiao, J. 2006. The financing behavior of listed Chinese firms. British Accounting Review, 38 (3): 239–258.