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Foreign investment, corporate governance and performance in the Chinese listed A Share companies

Beatson, Samuel A.; Chen, Jian

Authors

Samuel A. Beatson

JIAN CHEN JIAN.CHEN@NOTTINGHAM.AC.UK
Associate Professor



Abstract

We present a novel lens on the presence and impact of qualified foreign institutional investors (QFII) in top shareholdings of the non-financial domestically listed Chinese ‘A’ share firms. The initial results suggest that the presence of a QFII as a top shareholder in these companies is associated with their better performance, using both Tobin’s Q and ROA as the performance measures. Our models include variables representing corporate governance mechanisms, foreign legal person shares, a proxy for international affiliations and a number of time-variant firm characteristics. Economically, the coefficient of impact on the market measure is the more significant, while the effect of having a QFII in top shareholdings on both performance measures is empirically significant. Previously, studies have often ignored the potential for reverse causality beyond using lagged regressors. This is problematic. Therefore, we follow up with a 2SLS instrumental variables and system GMM model to further mitigate this potential and find the empirical relationship holds. Contrary to earlier work on QFIIs and governance post-implementation of the QFII scheme, the findings from our models suggest that the presence of a QFII top shareholder augments market performance holding equal existing corporate governance mechanisms and other controls.

Citation

Beatson, S. A., & Chen, J. (2018). Foreign investment, corporate governance and performance in the Chinese listed A Share companies. Journal of Chinese Economic and Business Studies, 16(1), 59-93. https://doi.org/10.1080/14765284.2017.1346931

Journal Article Type Article
Acceptance Date Jun 1, 2017
Online Publication Date Aug 2, 2017
Publication Date Jan 1, 2018
Deposit Date Dec 5, 2017
Publicly Available Date Feb 3, 2019
Journal Journal of Chinese Economic and Business Studies
Print ISSN 1476-5284
Electronic ISSN 1476-5292
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
Volume 16
Issue 1
Pages 59-93
DOI https://doi.org/10.1080/14765284.2017.1346931
Keywords G3 corporate finance and governance, G32 capital and ownership structure, F65 finance, G15 international financial markets
Public URL http://eprints.nottingham.ac.uk/id/eprint/48544
Publisher URL http://www.tandfonline.com/doi/abs/10.1080/14765284.2017.1346931
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf
Additional Information This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of Chinese Economic and Business Studies on 2 August 2017, available online: http://www.tandfonline.com/10.1080/14765284.2017.1346931.

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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