Mixed ownership reform,political connections,and overinvestment |
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| Authors: | Jizhou Wang Jin’an He Richard Cebula Maggie Foley Fangping Peng |
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| Institution: | 1. South China Business College, Guangdong University of Foreign Studies, Guangzhou, China;2. School of Business, Sun Yat-Sen University, Guangzhou, China;3. Haslam College of Business, University of Tennessee, Tennessee, Knoxville, USA;4. Davis College of Business and Technology, Jacksonville University, Florida, Jacksonville, USA |
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| Abstract: | The study discovers that mixed ownership reform aimed at enhancing the performance and resource allocation efficiency of state-owned enterprises may have unintended consequences in China. When the nature of state-owned control remains unchanged, there is a risk of increased overinvestment due to misaligned interests between state-owned equity representatives and companies. This incentive can be mitigated by introducing nonstate shareholders with political connections. The study employs a double machine learning method to analyze data from state-owned listed companies that introduced nonstate shareholders through stock issuance between 2008 and 2019. The research underscores that modern corporate governance mechanisms are crucial for successful mixed ownership reform. |
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