State Control, Legal Investor Protection, and Ownership Concentration: Evidence from China
研究中国1992-2003年间所有权集中度与法律投资者保护的关系，发现国家控制会替代正式法律保护，导致两者间不存在典型负相关，但对非国家控制企业该关系成立。
ABSTRACT Manuscript Type: Empirical Research Question/Issue: To control for the omitted‐variables and aggregation biases problem existing in previous cross‐country studies, our paper investigates the relationship of ownership concentration and legal investor protection across regions and over time in one emerging economy, China, during the period 1992 to 2003. Moreover, this paper examines whether state control affects this relationship. Research Findings/Results: For state‐controlled firms, we cannot find the typical inverse relationship between ownership concentration and legal investor protection documented by La Porta, Lopez‐de‐Silanes, Shleifer, and Vishny (1998 ), since state per se works as a substitute for formal legal investor protection in protecting property rights by exploiting political power. However, for non‐state‐controlled firms, the inverse relationship does hold. Theoretical Implications: Our findings suggest that the nature of the controlling shareholder should be taken into account when examining the relationship between ownership concentration and legal investor protection. Moreover, our findings give new insights, especially to the study on other emerging economies that share similar characteristics with China in terms of legal development and government control. Finally, the cross‐region study within one country provides a new perspective on the research in this area. Practitioner Implications: First, to provide a level playing field for different types of investors, the state's dual role of controlling shareholder and political power holder should be separated. Second, it is important to build up a good legal system to protect investors in order for a country to develop its capital markets, especially for the development of the non‐state sector.