State Control, Marketization, And Firm Value: Evidence From China

Abstract

Using a firm-level panel data of Chinese listed firms, this paper examines the effects of state control on firm value and the different impacts that have under different degree of marketization deeply. The results show: compared with non-state controlled firms, state controlled firms are imposed by much policy burden and have more serious tunneling or expropriation behaviors. Therefore, firm values in state controlled firms are lower than in non-state controlled firms. For state controlled firms, the lower the government administrative ranks, the more serious the intervention or expropriation behaviors imposed by government, and thus the lower the firm value. Compared with low marketization regions, the negative effects of state control and low government administrative rank control on firm value is relatively smaller in regions with high degree of marketization.