The Endogeneity Analysis Between Ownership Structure And Firm Performance On Chinese Listed Companies

This study investigates the relationships between the ownership structure (themain blockholder and the ratio of the management's holder) and the firm'sperformance (return of invested capital) which used different research methods anddifferent types of data using a sample of 213 Chinese listed firms during the year2000 to 2008. Under the hypothesis of whether or not the endogenous of theownership structure, and based on the method of Principal Components Analysis weextract the ratio of the main blockholder, this paper used the panel data Grangeranalysis, the cross data OLS, the panel data piecewise OLS, the panel data GLS, thedifference GMM and the system GMM respective to search the relationship betweenthe ownership structure. Empirical results indicate: Firstly, there is a causalrelationship between the ownership structure (the ratio of main blockholder) and thefirm's performance that is the ownership structure is a endogenous variable, at thesame time the results explain the no relationship between the ownership structure andthe performance which uses the cross data OLS, the panel data piecewise OLS and thepanel data GLS. Secondly, ownership structure is positively related to firmperformance also the firm performance is positively related to ownership structure.Thirdly, the free cash flow is positively related to the performance, there's nosignificant relationship between the performance and the firms nature, the growth ofthe firm is positively related to firm performance and the risk of the firm is positivelyrelated to firm performance.