Asymmetric Governance Mechanisms and Risk-taking in the Mixed Ownership Reform of State-owned Enterprises
The Third Plenary Session of the 18th Central Committee of the Communist Party of China proposed to"actively develop a mixed-ownership economy,"marking the beginning of a new round of state-owned enterprise(SOE)reform.In the current phase of mixed-ownership reform,many SOEs remain at a superficial level of mixing.Although non-state capital has been introduced at the equity level,it has not been granted sufficient control rights.The key to over-coming challenges in advancing the mixed-ownership reform of SOEs lies in ensuring the deep participation of non-state capital in corporate governance and achieving positive governance outcomes.In practice,an increasing number of non-state shareholders in mixed-ownership SOEs are appointing board members in excess of their equity proportion.By strengthening the power of non-state shareholders on boards of directors,their willingness and ability to participate in corporate governance have been effectively enhanced.Whether non-state shareholders'influence beyond their equity limitations,granting them greater decision-making power in major issues,can improve SOEs'risk-taking level and elevate their risk-taking capacity remains an open question.Additionally,the impact of different governance contexts on the governance effectiveness of non-state shareholders requires further empirical investigation.This paper offers a comprehensive analysis of the unequal distribution of ownership and control within SOE mixed-ownership reforms,focus-ing on the role of non-state shareholders in reshaping governance and decision-making dynamics.Drawing on data from Chinese A-share list-ed companies with mixed and state ownership from 2008 to 2021,it ex-amines how the over-appointment of directors by non-state controlling shareholders influences the risk-taking behavior of these enterprises.The study finds that such over-appointments significantly enhance the risk-taking levels of reformed SOEs,establishing a positive relationship between the proportion of non-state-appointed directors and the enter-prise's willingness to take on risk.The research further reveals that the effect of these governance changes is context-dependent.The impact of non-state director over-appointment is most pronounced in SOEs where the government exhibits a higher degree of willingness to dele-gate authority.This environment minimizes excessive administrative interference,allowing non-state directors greater latitude to influence strategic decisions.Additionally,the effect is magnified in firms where executives have lower political promotion incentives,highlighting the importance of reducing political constraints to enable more market-ori-ented decision-making processes.Mechanism tests provide deeper insights into how non-state governance influences corporate outcomes.The findings indicate that the over-appointment of directors by non-state shareholders addresses structural inefficiencies like overstaffing,optimizes executive compensation systems,and motivates management to undertake riskier but potentially higher-return investments.These gov-ernance improvements not only promote a culture of strategic risk-taking but also drive measurable economic benefits.Notably,this enhanced risk-taking behavior translates into increased enterprise value,with sig-nificant gains observed over the following one to two years.By shedding light on the governance role of non-state shareholders and their ability to reshape board dynamics,this study highlights the critical importance of integrating non-state and state capital in a balanced and effective manner.It offers robust empirical evidence that supports the deeper reform of SOE governance frameworks,emphasizing the need for active non-state participation to unlock the full potential of mixed-ownership enterprises.These findings provide valuable theoretical and practical implications for policymakers and reformers aiming to promote high-quality develop-ment and sustainable growth in SOEs.This study makes two significant contributions to the existing literature.Expansion of Corporate Risk-Taking Analysis within Mixed-Owner-ship Reforms:The research broadens the scope of corporate risk-taking studies by focusing on the asymmetric governance structures inherent in mixed-ownership SOEs.By analyzing governance dynamics at the board level,the study provides evidence that non-state shareholders'over-appointment of directors enhances risk-taking in SOEs.Addition-ally,it delves into the constraints on this relationship imposed by factors such as government intervention,overstaffing,and executive incentive mechanisms.This nuanced exploration adds depth to our understanding of how governance asymmetry affects corporate behavior in state-con-trolled enterprises.Supplementation of Research on Economic Outcomes of Non-State Shareholder Involvement:The study contributes to the body of knowledge on the economic implications of non-state shareholder participation in SOE governance from the perspective of risk-taking.De-parting from the traditional focus on equity structure,it shifts attention to the effects of board-level governance.By demonstrating how non-state shareholders'over-appointment of directors influences corporate invest-ment decisions,the research highlights a novel pathway through which governance arrangements can drive strategic corporate outcomes.This insight underscores the critical role of board composition in determining the economic benefits of mixed-ownership reforms.Together,these con-tributions provide a more comprehensive framework for understanding the interplay between governance mechanisms,risk-taking,and eco-nomic performance in SOEs,offering both theoretical advancements and practical implications for future reform initiatives.This research elucidates the underlying relationship between the over-appointment of directors by non-state shareholders and the en-hanced risk-taking behavior of mixed-ownership SOEs.By demonstrat-ing how such governance mechanisms enable non-state shareholders to influence major decisions,this study reveals that their participation goes beyond mere equity contributions,directly impacting corporate strategy and behavior.The findings provide a nuanced understanding of how empowering non-state shareholders can address traditional risk-aver-sion tendencies in SOEs,fostering a more balanced approach to risk and return.This dynamic not only helps unlock the potential for higher enterprise value but also aligns with the broader objectives of SOE re-form—improving operational efficiency,enhancing competitiveness,and achieving sustainable growth.Empirically,the research supports the argument that structural changes in governance are instrumental in driving the high-quality development of SOEs.The emphasis on gover-nance asymmetry offers actionable insights for policymakers and reform practitioners,highlighting the need for tailored mechanisms that amplify the role of non-state shareholders.Theoretically,this study enriches the discourse on SOE reform by bridging the gap between governance in-novation and economic outcomes.It adds depth to the mixed-ownership literature,showcasing how asymmetric governance arrangements can be leveraged to address the challenges of balancing state control with market dynamics in the pursuit of modernization and efficiency.
Non-state Shareholder GovernanceAsymmetryOwn-ership Reform of State-owned EnterprisesOver-appointment of DirectorsRisk-takingMixed Owner
万方数据
维普
