State Ownership, Governance and Financial Performance of Chinese State Owned Enterprises

Quan Cheng and Alex Ng

The strand of literature on Chinese firm performance shows that state ownership clearly has influence. This state-performance relationship is found to be linear, concave and convex shaped which remains to be resolved yet there are few studies. The authors study a large and recent sample of 27,896 Chinese publicly listed firm year observations during 2001-2011 using panel regressions. The authors show that state ownership is related to financial performance as measured by Tobin's Q and stock returns. Our results affirm a non-linear, concave relationship between state ownership and financial performance. The authors also show how firm governance plays a clear role in Chinese firm performance.