Profitability and productivity of Chinese industrial firms: Measurement and ownership implications |
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| Institution: | 1. School of Economics, Nanjing University, Nanjing, China;2. School of Business, Nanjing University, Nanjing, China;3. Department of International Economics and Trade, Nanjing University, Nanjing, China;1. Key Laboratory of Watershed Geographic Sciences, Nanjing Institute of Geography and Limnology, Chinese Academy of Sciences, Nanjing, China;2. Department of Planning and Environmental Management, Manchester Urban Institute, The University of Manchester, Manchester, UK;3. School of Public Administration, Zhongnan University of Economics and Law, Wuhan, China;1. School of International Trade and Economics, Central University of Finance and Economics (CUFE), 39 South College Road, Haidian District, Beijing 100081, PR China;2. Industrial Economy Research Department, Development Research Center of the State Council, R.216, No. 225, Chaoyangmen Nei Dajie, Beijing 100010, PR China;3. Organization for Economic Cooperation and Development (OECD), Economics Department, 2 Rue André Pascal, Paris 75016, France |
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| Abstract: | This paper assesses the reform of state-owned enterprises (SOEs) by examining the effect of ownership on the profitability and productivity of Chinese industrial firms. Several methodological issues concerning profit measurements of enterprises under different ownership structures are identified and discussed. Test results based on a panel data set provide evidence that capital structures, taxes, and welfare burdens have a significant effect on the financial performance of Chinese enterprises. After adjusting for these effects, SOEs still show poor financial performance, which, we show, is attributable to the effect of “soft loans.” Although SOEs grew faster in productive efficiency during 1996–1998, their growth rate in profitability lagged behind that of firms with other ownership structures. |
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