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Ownership structure, corporate governance and investment efficiency of Chinese listed firms

Naiwei Chen (Changzhou University, Changzhou, China)
Hao-Chang Sung (Department of Finance, College of Economics, Jinan University, Guangzhou, China)
Jingjing Yang (School of Finance, Guangdong University of Foreign Studies, Guangzhou, China)

Pacific Accounting Review

ISSN: 0114-0582

Article publication date: 7 August 2017



This paper aims to examine whether and how ownership structure and corporate governance have bearings on the investment efficiency of Chinese listed firms.


The authors measure the investment efficiency by following the work of Richardson (2006) and classify listed firms into two categories: state-owned enterprises (SOEs) and private firms. OLS regressions with both industry and year fixed effects are used to investigate the effect of ownership structure and governance mechanisms on the listed firms’ investment efficiency.


The authors find that ownership concentration has a negative impact on investment efficiency, and this effect is more pronounced in SOEs than in private firms. In addition, adoption of incentive-based compensation helps improve investment efficiency. Compared with other types of institutional investors, mutual funds are more likely to exert a positive effect on the investment efficiency of investee companies.


This paper examines the monitoring effect of governance mechanisms in China from a new perspective, which is the investment efficiency. Furthermore, previous studies provide minimal evidence indicating any effect of incentive-based compensation on firm performance in China. This study provides empirical evidence on this effect by using incentive-based compensation (whether CEOs have been granted stock options) as an explanatory variable in the regression models.



Sung appreciates the financial support from the National Social Science Foundation (No: 15BJY011); and Yang thanks for the financial support from the National Natural Science Foundation of China (No: 71563020).


Chen, N., Sung, H.-C. and Yang, J. (2017), "Ownership structure, corporate governance and investment efficiency of Chinese listed firms", Pacific Accounting Review, Vol. 29 No. 3, pp. 266-282.



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