Politician control, agency problems and ownership reform |
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Authors: | Lixin Colin Xu Tian Zhu Yi-min Lin |
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Affiliation: | The World Bank and Guanghua School of Management, Peking University. MC 3-420, Development Research Group, The World Bank, 1818 H Street, N.W., Washington, DC 20433. E-mail: .; Division of Social Science, Hong Kong University of Science and Technology |
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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. |
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Keywords: | Ownership politician control agency problems state-owned enterprises corporate governance |
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