A study on the optimal shareholding proportion of the controlling shareholders in the competitive mixed-ownership enterprises: Evidence from Chinese listed companies

There is a wide debate on the optimal shareholding proportion of controlling shareholders. Under the background of China's mixed-ownership reform, this paper focuses on a specific firm setting of mixed-ownership enterprises in fully competitive industries, and tries to find the heterogeneity in the association between controllers' shareholding and firm performance. Specifically, with a sample of China's A-share listed companies from 2007 to 2018, we find significant differences in this relationship due to different types of controlling shareholders. The effect of controller shareholding on firm performance is not significant in foreign-controlled enterprises, while that of private enterprises presents a monotone increasing linear relation with statistical significance. No optimal controlling shareholding interval is found in either foreign-controlled or private-controlled enterprise. In state-controlled enterprises, we find an overall inverted U-shaped with local stage linear relationship between state-controlling enterprises' controller shareholding and firm performance. The optimal interval of state-controlling shareholding is 42%–68%.