Business Group Performance in China: Ownership and Temporal Considerations
Management and Organization Review, 5 (2):
167-193 (2009)Carney, Michael Shapiro, Daniel Tang, Yao.Abstract
P>We address the institutional voids hypothesis, which suggests affiliation
with a business group will improve a firm's performance in circumstances
of poor-quality institutions and extensive market failures. We hypothesize
that initial positive effects of group affiliation should decline
as the quality of market institutions improves. Further, we hypothesize
that differences in state and private ownership will influence the
value and persistence of firm affiliation. Using data on 476 publicly
listed firms in 1999 and 467 matched firms in 2004, we find support
for a temporal hypothesis that affiliation with a business group
improves performance, but the value of group affiliation declines
over time. We also find support for a state 'helping hand' hypothesis
that suggests firms with high levels of state ownership initially
experienced an amplified value effect from their group affiliation,
which disappeared by 2004. The results suggest that China's policy
makers are beginning to establish an institutional and market infrastructure
that is conducive to entry by unaffiliated, freestanding firms.