Will the Governance of Non-State Shareholders Inhibit Corporate Social Responsibility Performance? Evidence from the Mixed-Ownership Reform of China’s State-Owned Enterprises

Abstract

Fulfilling social responsibilities in order to sustain development has increasingly become a strategic choice for companies. Good corporate governance can guarantee high corporate social responsibility performance. This paper selects state-owned enterprises listed on the Shanghai and Shenzhen A-Share market from 2013 to 2019 as samples and uses a panel data OLS regression model to empirically test the impact of the governance of non-state shareholders on the social responsibility performance of state-owned enterprises from two aspects of shareholding: structure and high-level governance. The results show that, first, the governance of non-state shareholders helps to improve the social responsibility performance of state-owned enterprises; second, that mechanism analysis indicates that non-state shareholders improve the social responsibility performance of state-owned enterprises by improving the internal control quality; and third, the impact of the governance of non-state shareholders on the social responsibility performance of state-owned enterprises is heterogeneous in three aspects: the degree of marketization, the level of product market competition, and the corporate profitability. This paper not only helps to clarify the factors which influence the social responsibility performance of state-owned enterprises, but also enriches studies on the economic consequences brought by non-state shareholders through participating in the governance of state-owned enterprises.

Governance of non-state-owned shareholders and corporate capital structure decision: A mechanism test from the opportunistic behavior of management

“…The mixed-ownership reform of state-owned enterprises reappeared in the political posture of the top-level design. This introduced non-state-owned capital and assigned senior executives to actively participate in the governance of state-owned enterprises, which then, to a certain extent, alleviate the opportunistic behavior, such as the "owner absence" and "internal control", thereby improving the quality of corporate governance in state-owned enterprises [16]. Moreover, the "profit-seeking nature" of non-state-owned capital make nonstate-owned shareholders to supervise the management of state-owned enterprises, thereby improving corporate performance and increasing corporate value.…”

“…Therefore, non-stateowned shareholders can effectively influence corporate capital structure adjustment decisions by appointing senior executives to participate in SOEs' governance. In addition, Zhang et al [16] find that non-state-owned shareholder' governance can improve the sensitivity of executive compensation performance; and Frank and Goyal [22] find that incentive compensation for executives is conducive to speed up the adjustment of capital structure. This also shows that through constraints and incentive effects, SOEs can reduce management opportunistic behavior, improve governance levels, and reduce adjusting costs, thereby affecting capital structure adjustment decisions.…”

“…Mixed-ownership reform introduces the non-state shareholders in state-owned enterprises, which can affect senior executives' decision-making from equity checks and balances and corporate governance. This is mainly shown as the fact that the supervision and restriction from the non-state shareholders' executives will impact the financial decision-making behavior of top executives, thus improving the internal governance mechanism in SOEs [16]. However, since there are many differences in SOEs, such as the levels of government control and market competition, the roles played by non-state-owned shareholders in corporate governance are also different, and their decision-making behavior must be affected by all levels of government [25].…”

Do state-owned participation shareholders improve the environmental governance level of private enterprises? Evidence from Chinese listed firms

“…In this environment, private enterprises will be more likely to choose projects with greater investment benefits rather than environmental governance to achieve local economic development goals. Conversely, when the degree of regional marketization is relatively high, the external economic and legal environment is better, there is less government intervention, and the local government pays more attention to the protection of the ecological environment (Zhang et al, 2022). At this time, the introduction of state-owned participation shareholders by private enterprises will not only improve the governance structure and supervision mechanism of the enterprises but also their business objectives and development strategies will be improved with the entry of state-owned participation shareholders with environmental protection obligations, prompting them to make more environmental investments.…”

Board's informal hierarchy: influences on enterprise innovation quality

“…Although some studies have found that the board of directors of SOEs, being influenced by a traditional bureaucratic system, shows characteristics such as hierarchy recognition and benefits from the strong rank order of a "quasi-official" status, which in turn reduces the barriers to innovative risk decisions for high-level directors (Zhang et al, 2022a), these studies overlook a significant contradiction: SOEs often represent the interests of the state, beyond pursuing economic benefits, the motivation behind board decisions tends to focus more on stabilizing the economy, regulating the market, and ensuring employment among other societal performances (Sun et al, 2018;Zhang et al, 2022b). Therefore, the boards of SOEs bear more abundant political responsibilities (Bhat et al, 2020).…”