Does State-Owned Capital Matter for Strategic Change? Evidence From Chinese Private Enterprises

Abstract

State-owned capital, serving as a stabiliser in economic development, can strengthen risk prevention by taking equity stakes in private enterprises, thereby reducing strategic changes in these firms. This study examines non-financial listed companies on China's Shanghai and Shenzhen A-share markets that were privately owned at establishment between 2007 and 2022, to assess the extent and mechanisms by which state-owned capital equity participation influences strategic change in private enterprises. The findings show that state-owned capital participation significantly reduces strategic change in private enterprises. Mechanism analysis indicates that this effect occurs mainly through reduced risk-taking and enhanced external oversight. Further analysis shows that the inhibitory effect of state-owned capital participation on strategic change is stronger when environmental dynamism is higher, marketisation is greater, and prior performance is better. Additionally, regarding specific dimensions of strategic change, state-owned capital participation significantly reduces advertising expenditure. This paper contributes to research on the economic consequences of state-owned capital participation and the factors influencing corporate strategic change. It offers theoretical support and practical guidance for government departments to advance reverse mixed-ownership reform, enabling different ownership types to learn from each other, promote mutual development, and achieve shared progress.