Ownership structure and corporate performance in emerging markets
Creators: name: Wang, Kun
Publisher: name: The Australian National University
Year: 2011
Subjects: subject: HG4028.S7 W36 2011
subject: Stock ownership
subject: Investments
subject: Corporate governance
subject: Organizational effectiveness
subject: Corporations Investor relations

description: The thesis consists of four essays that investigate the relation between ownership structure and corporate performance in emerging markets. Essays 1 and 2 are meta-analyses of the ownership-performance literature. Essay 3 examines shareholder type and performance relations for listed Chinese corporations. Essay 4 investigates the relevance of within-group acquisitions for propping versus tunneling of listed Chinese corporations. Essay 1 uses meta-analytic methods to examine whether there is an underlying homogeneous relation between ownership concentration and corporate performance in emerging markets, and what might contribute to the conflicting empirical findings in the literature. Using 313 correlations from 27 primary studies, I find that, in emerging markets, on average concentrated ownership is associated with a positive firm performance. However, I reject the hypothesis of a homogenous relation between ownership concentration and corporate performance. Meta-regressions of the 313 correlations and their corresponding study characteristics reveal that the reported ownership-performance relation in many emerging market studies may be exaggerated by under-specifying the models, but that the treatment of endogeneity also matters. Holding these sources of heterogeneity constant, there are significant differences across countries and regions that may be better revealed and explained by further research using adequately specified models and appropriate estimation methods. Essay 2 uses statistical meta-analysis to integrate the diverse empirical findings and assess the relation between different types of ownership and firm performance in emerging markets. Privatization has been an important phenomenon since the 1980s, which is accompanied by ongoing arguments about the advantages and disadvantages of government ownership in business corporations. With the continuing development of emerging stock markets, influences of government and private ownership on financial performance of listed corporations in emerging markets have attracted more and more research interest, yet yielded many inconsistent empirical results. I use meta-analytic methods to integrate the diverse empirical findings and empirically assess the relation between different types of ownership and firm performance in emerging markets. I find that private ownership (including individual/family, foreign, and institutional investor ownership) outperform government ownership in terms of financial performance regardless of the performance measures used. Essay 3 examines whether government and family ownership, under various government performance agenda, is associated with performance difference in Chinese listed corporations. I develop performance measures for social objectives of government ownership, focusing on employment and tax contributions, and use system GMM to account for various endogeneity problems. I find that government ownership has different implications in relation to social objectives. Different levels of Chinese government emphasize employment objectives over tax and financial-performance objectives; even corporations in poor financial situation appear to emphasize employment objectives while potential damage to these corporations is mitigated through preferential tax treatment. Essay 4 investigates the potential incentives for and use of within-group equity acquisitions by listed Chinese corporations to facilitate expropriation by controlling shareholders or the propping up of weak enterprises within business groups. I use event study approach, estimating acquirers' abnormal returns while using Heckman two-step regressions to control for potential selection bias. The results suggest that acquisition incentives contribute to market reactions to intra-group acquisition announcements. The market response is more positive for acquisitions in the presence of propping incentives, compared to acquisitions with expropriation incentives and imputed arms-length acquisitions. The identity of the controlling shareholder matters; market responses tend to be lower for acquisitions by family-controlled acquirers and higher for acquisitions by local government-controlled acquirers.