Mixed-ownership reform and factor misallocation: Evidence from China

Area of Science:

• Economics
• Business Administration
• Public Policy

Background:

• Enterprise ownership structure significantly impacts factor allocation efficiency.
• Understanding the role of state-owned enterprises (SOEs) in resource allocation is vital for economic development.
• Chinese SOEs are undergoing reforms to improve efficiency and resource allocation.

Purpose of the Study:

• To investigate the relationship between changes in SOE ownership structure and resource misallocation in China.
• To determine the impact of non-state shareholding on the resource allocation efficiency of Chinese SOEs.
• To identify an optimal range for non-state shareholding in SOEs to enhance economic development.

Main Methods:

• Utilized Chinese firm-level data for empirical analysis.
• Examined the U-shaped relationship between non-state shareholding and SOE resource allocation efficiency.
• Analyzed the heterogeneity of mixed shareholding impacts on resource allocation.

Main Results:

• A U-shaped relationship was identified between non-state shareholding and SOE resource allocation efficiency.
• The highest resource allocation efficiency was observed when non-state shareholding ranged from 10% to 20%.
• Mixed shareholding demonstrated heterogeneous effects on resource allocation, indicating varied impacts across different SOEs.

Conclusions:

• An optimal level of non-state shareholding exists for maximizing SOE resource allocation efficiency.
• Mixed-ownership reforms require careful consideration of heterogeneity for effective implementation.
• Findings provide practical guidance for SOE reforms in China and other developing economies.