| Abstract | At present, China's ongoing mixed ownership reform has encountered some problems, mainly for the arrangement of corporate control: on the one hand, the state-owned shares on behalf of the super-shareholder status still occupy the control advantage, weaken the heterogeneous shareholders' ability to participate; On the other hand, "one vote for one share" voting rules led to corporate control arrangements subject to ownership arrangements, state-owned enterprises(SOEs)' mixed ownership reform is getting difficult to advance to a deep level. How to arrange corporate control then be able to both promote mixed ownership reform and improve performance?
There are two kinds of ideas on prior studies about control rights arrangement. One is the research under the equal logic of equity and control allocation, arguing that the arrangement of control rights should be decided by equity structure, pursuing “one vote”. The other is the research under the unequal logic of equity and control allocation, arguing that the arrangement of control rights can be separated from equity structure and do not need to follow the rule of “one vote”. Most scholars' research is confined to the first idea, such as Grossman & Hart (1986), Hart & Moore (1990), Harris & Raviv (1989). Based on the enterprise’s practice of unequal allocation between equity and control, some scholars begin to revise, and thereafter, put forward the unequal allocation between equity and control, as discussed in Choi (2015). Then, for a company co-existed with state-owned shares and non-state-owned shares, how to arrange control? Pursue “one vote” then improve firm performance? To answer this question, sufficient empirical data is needed to verify what extent will the equity and control allocation affect firm performance.
By collecting data of firm performance, equity structure and board structure in all listed companies under SASAC, State Council manually, and using 1 year lag of equity structure and board structure to overcome the endogenous issue raised by Demsetz & Lehn (1985) and Davidson & Rowe (2004), under the premise of controlling industry classification, this paper investigates the relationship between equity structure, board structure and firm performance.
We found that: (a) reducing the proportion of the first five largest state-owned shares is conducive to improving firm performance, but improving the proportion of the first five largest non-state-owned shares too fast is not conducive to improving firm performance; (b) increasing the proportion of state-owned directors is conducive to improving firm performance, but reducing the proportion of state-owned directors too fast is not conducive to improving firm performance. And compared with equity structure, the board structure has a greater effect on firm performance. Based on the above, the paper explores the best range of the proportion of state-owned and non-state-owned shares, and proposes approaches and suggestions about the reform of mixed-ownership enterprise through transfer or sharing of control rights, under the premise of unchanging the controlling status of state-owned shares.
The main contributions of this paper are: (1) handled the real attributes of shareholders and directors carefully by judging the actual controller of the firm; (2) considering that equity and control may have inconsistency effects, examined the relationship between equity structure, board structure and firm performance, tested the different effects of equity and control on firm performance, demonstrated the logical rationality of unequal allocation between equity and control; (3) explored the best range of the proportion of the top five state-owned shareholders and non-state-owned shareholders, provided a quantitative basis for mixed ownership reform of SOEs; (4) in view of the actual situation of SOEs, put forward some countermeasures and suggestions to promote mixed ownership reform.
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