Do Private Firms Outperform SOE Firms after Going Public in China Given their Different Governance Characteristics?

  • Shenghui Tong Chinese Academy of Finance and Development
  • Eddy Junarsin Universitas Gadjah Mada
Keywords: governence, private firms, financial management

Abstract

This study examines the characteristics of board structure that affect Chinese public firm’s financial performance. Using a sample of 871 firms with 699 observations of previously private firms and 1,914 observations of previously state-owned enterprise (SOE) firms, we investigate the differences in corporate governance between publicly listed firms that used to be pure private firms before going public and listed firms that used to be SOEs before their initial public offerings (IPOs). Our main finding is that previously private firms outperform previously SOE firms in China after IPOs. In the wake of becoming listed firms, previously SOE firms might be faced with difficulties adjusting to professional business practices to build and extend competitive advantages. In addition, favorable policies and assistance from the government to the SOE firms might have triggered complacency, especially in early years after getting listed. On the other hand, professional savvy and acumen, combined with efficiency and favorable business climate created by the government have probably led the previously private firms to improve their values stronger and faster.

Author Biographies

Shenghui Tong, Chinese Academy of Finance and Development

TONG, Shenghui is an Associate Professor of Finance and Associate Dean of Chinese Academy of Finance and Development, Central University of Finance and Economics, Beijing, P. R. China. He received his Ph.D. in Finance from Southern Illinois University Carbondale in 2004. He was an Assistant Professor of Finance at Siena College and Illinois College, respectively, from 2004 to 2008. His research interests include corporate governance, capital structure, and mergers and acquisitions. He has published articles in various finance journals, such as Journal of Applied Finance, Journal of Business Strategy, Journal of Investing, China Economic Perspective, Journal of Modern Economic Science (Chinese), and Journal of China Finance.
    Author contact’s details: Chinese Academy of Finance and Development, Central University of Finance and Economics, Haidian District, Beijing, China; E-mail: tongshenghui@yahoo.com.

Eddy Junarsin, Universitas Gadjah Mada

JUNARSIN, Eddy is a Lecturer in Finance at the Faculty of Economics and Business, Universitas Gadjah Mada. He completed his Ph.D. program in Finance at Southern Illinois University Carbondale in 2013. His research interests cover corporate finance, corporate governance, executive compensation, investments, and financial institutions. He has presented and published papers in several conferences and journals, both in Indonesia and internationally. In addition, he is an ad hoc reviewer for Applied Economics, Applied Financial Economics, International Journal of Energy Sector Management.
    Author contact’s details: Faculty of Economics and Business, Universitas Gadjah Mada, E-mail: john.junarsin@feb.ugm.ac.id.

References

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Published
2013-06-12
How to Cite
Tong, S., & Junarsin, E. (2013). Do Private Firms Outperform SOE Firms after Going Public in China Given their Different Governance Characteristics?. Gadjah Mada International Journal of Business, 15(2), 133-170. Retrieved from https://dev.journal.ugm.ac.id/v3/gamaijb/article/view/15387
Section
Articles