A study of ownership concentration, control and evolution in Chinese Ipos

Abstract

Chinese IPO companies that have a mixed ownership structure and the state still keeps majority control over them have been commonly recognized as their typical features by researchers worldwide. This paper gives a cross-sectional analysis on the way of concentration between different groups of shareholders and the evolution of state and private control for the 129 IPO companies that went public in 1993. First, we find that smaller and modern industrial companies are concentrated with indirect state shares (legal persons and employee shares) and A shares (domestic private investors) and are more widely held. Conversely, larger and traditional industrial companies are heavily concentrated with direct state shares. Second, smaller, growing and high risk companies has a greater reduction of state control over the 7 year period. By contrast, the state retains majority control in larger and strategically important companies even 7 years after their flotation. Lastly, the concentration of foreign shares displays the fact that the Chinese government has instituted favourable policies to support the development of larger companies and has given priority to them to raise foreign capital in the overseas market.