Corporate governance and firm value: Evidence from Chinese state-controlled listed firms

The association between corporate governance and firm value has been extensively studied in Chinese listed firms. Based on the characteristics of their ultimate shareholders, Chinese listed firms can be categorised as (1) central state-controlled, (2) local state-controlled or (3) non-state-controlled. Some scholars have described Chinese government policy as ‘zhuada fangxiao’, thus suggesting that the corporate governance mechanisms (CGMs) of central state-controlled listed firms (SCLFs) are better than those of local state-controlled listed firms. Therefore, this paper specifically examines the influence of CGMs on the value of central SCLFs and local SCLFs. Analysis of 2006 firm-year observations from 2007 to 2009 suggests that the aggregate ownership of other large shareholders and the remuneration of top executives exhibit different effects on firm value in central and local SCLFs. The results also provide evidence that there is no endogenous effect of firm value on the ownership of the largest shareholder in central and local SCLFs.