Effect of Ownership Structure on Firm Values in Chinese Companies

This report investigates the effects of ownership structure on firm values within Chinese companies. It examines three key aspects: ownership concentration, control right divergence, and owner identity. The research utilizes a conceptual framework and formulates hypotheses to explore the relationships between these ownership factors and firm performance. The methodology includes regression and correlation analyses, applied to data collected through questionnaires from 60 respondents. Demographic analysis reveals insights into the sample's gender and tenure distribution. The data analysis explores the impact of corporate governance, audit practices, and control rights on firm value. The findings suggest that employees have varying levels of awareness regarding the impact of these factors on their companies. The report concludes with an assessment of the influence of different ownership structures on firm performance, offering valuable insights into the dynamics of Chinese companies.

Running Head: EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN
COMPANIES
Effect of Ownership Structure on Firm Values in Companies
Name of the Student
Name of the University
Author Note

1EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
Table of Contents
CHAPTER FOUR: DATA ANALYSIS.........................................................................................2
4.1 Introduction............................................................................................................................2
4.2 Conceptual Framework..........................................................................................................2
4.3 Problem Statement.................................................................................................................3
4.4 Hypothesis Development.......................................................................................................3
4.5 Research Methodology..........................................................................................................4
4.6 Data Analysis.........................................................................................................................5
4.6.1 Demographic Analysis........................................................................................................5
4.6.2 Analysis of Ownership Strategies...................................................................................8
4.6.3 Correlation Analysis.......................................................................................................8
4.6.3 Testing of relevant Inferences..........................................................................................10

2EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
CHAPTER FOUR: DATA ANALYSIS
4.1 Introduction
This research is mainly aimed towards the effects of ownership structures on firm values
of different types of firms. Ownership structure can be described as three different types of
factors – Ownership Concentration, Control Right Divergence and Owner Identity. The effects
and influence of these three factors of the firm value has to be assessed.
4.2 Conceptual Framework
The concepts of these three types of ownership structures will be described in this
section. The framework under which the study will be conducted is given here. The positive and
negative effects of the ownership structure on the firm performance have been discussed in
details in the analysis section. The main aim of the study is to test how the fir performance is
affected by the ownership structures.

3EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
4.3 Problem Statement
As per the aim of the research, the following research questions can be framed. Based on
these research questions, data has been collected. The analysis of the data will also be conducted
on the basis of the research objectives.
 What is the effect of Ownership Concentration on the performances of the Chinese
companies?
 What is the effect of Control Right Divergence on the performances of the Chinese
Companies?
 Is there any association between the identity of the owners and the firm values?
4.4 Hypothesis Development
Keeping the research questions and objectives in mind, the following hypothesis has been
framed. The null and alternate hypothesis for the first research question is given as follows:
Null Hypothesis (H01): Ownership Concentration does not have any significant effect on the
performances of the Chinese Companies
Alternate Hypothesis (HA1): Ownership Concentration has significant effect on the
performances of the Chinese Companies
For the research question stated second, the null and the alternate hypothesis that can be
developed is given as follows:
Null Hypothesis (H02): Control Right Divergence does not have any significant effect on the
performances of the Chinese Companies

4EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
Alternate Hypothesis (HA2): Control Right Divergence has significant effect on the performances
of the Chinese Companies
For the last research question of this study, the null and the alternate hypothesis that has
been developed from the research question is given as follows:
Null Hypothesis (H03): There is an association between the Identity of the owners and the Firm
Values
Alternate Hypothesis (HA3): There is no association between the Identity of the owners and the
Firm Values
4.5 Research Methodology
To test the first hypothesis, in which the effect of ownership concentration on the firm
value is to be tested, regression analysis has been conducted as regression is the best method to
test the effect of an independent variable on a dependent variable.
The second hypothesis also has been framed in order to test the effect of Control Right
Divergence on Firm Performance. In this case also, the effect of an independent variable
(Control Right Divergence) on the dependent variable (Firm Performance) has to be tested. Thus,
regression analysis will be conducted for this case too.
The third hypothesis has been framed to test the association between the variables
owner’s identity and firm value. To test the association between two variables for a sample a
correlation analysis can be conducted. To predict the results for a whole population, correlation
analysis is not that efficient. In order to do that, Chi-Square test of association has to be
computed.

5EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
4.6 Data Analysis
The data has been collected for the analysis of the effects of ownership structures on firm
values in Chinese companies. The data was collected on the basis with the help of a
questionnaire, which is attached in the APPENDIX section of the paper. The questionnaire was
made as a word document and uploaded in the internet as a Google form. For over a fortnight,
the responses of 60 valid respondents were recorded out of 70 responses received. Thus, the
success rate of the data collection is almost 86 percent.
4.6.1 Demographic Analysis
Demographic analysis of the 60 valid responses has been computed. Demographic
analysis includes the descriptive statistical analysis of the demographic profile of the valid 60
respondents.
It can be seen from table 4.1 that out of the 60 respondents 25 were found to be female
and 35 were male members. Thus, it can be clearly said that 41.7 percent of the responses were
from the female point of view and 5.8 percent of the responses were from the female point of
view. The percentages of male and female members are almost same. Thus, the analysis will give
a good understanding of the views of the Chinese people on the research topic.
Table 4.1: Gender Distribution
Frequency Percent
Valid
Female 25 41.7
Male 35 58.3
Total 60 100.0

6EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
Figure 4.1: Pie Chart showing Gender Distribution of the sample
The second demographic factor considered in the study is the tenure of the employees
working in the organization. This has been categorized into four groups. 31 of the respondents
have worked between 0-2 years, 20 of them have been working between 2-5 years, 6 of them
have been working between 5-8 years and only 3 of the respondents have been working for more
than 8 years. Thus, it can be said that 51.7 percent of the employees are comparatively new to the
company. That is, most of the respondents are new employees of the companies. 33.3 percent of
the employees have been serving the company for 2-5 years. Not much responses were received
from employees who have been working for longer periods such as more than 5 years. Only 10
percent of the employees are working for 5-8 years and 3 percent have been working for more
than 8 years. Thus, not much experienced opinion has been received on the subject.

7EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
Table 4.2: Frequency table of working tenure of the employees in the organization
Frequency Percent
Valid
0 - 2 years 31 51.7
2 - 5 years 20 33.3
5 - 8 years 6 10.0
More than 8 years 3 5.0
Total 60 100.0
Figure 4.2: Pie chart showing the time-period of percentage of employees serving the company
Next, descriptive measures for the type of the ownership structure followed by the
different companies in china are discussed. Four types of ownership structures are considered
here. They are, Sole Proprietorships, Partnership, Joint Venture and Privately Owned firms. Each
of the 60 respondents has given their opinion on which ownership structure their company
follows. It can be seen clearly from the frequency table (Table 4.3) that according to the

8EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
respondents most of them work in a company that runs on partnership. 46.7 percent of the
employees work in a company that runs on partnership. From this information it can be
concluded that, most of the Chinese companies run on partnership. 26.7 percent of the employees
work in a privately owned company. Thus, it can be said that after joint venture, the most
common mode of ownership of Chinese companies is privately owned companies.
4.6.2 Analysis of Ownership Strategies
Ownership can be of three types. These are Ownership Concentration, Control Right
Divergence and Owner Identity. The different factors that can affect these types of ownerships
have been discussed below.
4.6.2.1 Ownership Concentration
The first factor for ownership concentration that has been taken into consideration is that
whether the corporate governance and rule of law holds to be important for the concentration of
ownership. From the responses of the 60 employees working in different sectors of the Chinese
companies, it can be seen that 18 percent of the employees have given neutral responses about
the matter. That is, they do not know much whether this factor has an importance in impacting
the firm’s performance. 38.3 percent of the employees agree to the fact that it is not important for
the firm’s performance. On the other hand, 31.6 percent of the employees agree to the fact that it
is important for the firm’s performance. Table 4.3 gives the details of these values. Thus, it can
be said from the acquired data that the employees do not have a clear idea about the effect of
corporate governance towards their respective companies. This has been shown
diagrammatically in figure 4.3.
Table 4.3: Corporate governance and rule of law holds to be important for the
concentration of ownership

9EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly Disagree 13 21.7 21.7 21.7
Disagree 10 16.7 16.7 38.3
Neutral 18 30.0 30.0 68.3
Agree 14 23.3 23.3 91.7
Strongly Agree 5 8.3 8.3 100.0
Total 60 100.0 100.0
Figure 4.3: Bar graph showing the distribution of responses about corporate governance
and rule of law holds to be important for the concentration of ownership

10EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
The next factor that is to be discussed is whether Audit, audit disclosure and transparency
score from the firm leads to investment opportunities leading to concentration of ownership. In
this case, most of the employees have agreed to the factor. About 41.6 percent of the employees
have agreed to the fact that Audit, audit disclosure and transparency score from the firm leads to
investment opportunities leading to concentration of ownership. On the other hand, 30 percent of
the employees are still neutral and 25 percent of them disagree to the fact. Thus, it can also be
said from this data, the employees are not much aware of this factor either. Table 4.4 gives the
details of the values followed by figure 4.4 which shows the distribution of the employees’
opinion for this factor.
Table 4.4: Audit, audit disclosure and transparency score from the firm leads to
investment opportunities leading to concentration of ownership
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly Disagree 2 3.3 3.3 3.3
Disagree 15 25.0 25.0 28.3
Neutral 18 30.0 30.0 58.3
Agree 20 33.3 33.3 91.7
Strongly Agree 5 8.3 8.3 100.0
Total 60 100.0 100.0

11EFFECT OF OWNERSHIP STRUCTURE ON FIRM VALUES IN COMPANIES
Figure 4.4: Bar graph showing the distribution of responses about Audit, audit disclosure
and transparency score from the firm leads to investment opportunities leading to
concentration of ownership
4.6.2.2 Control Right Divergence
The first factor for Control right divergence has been considered as the control rights and
cash flow rights can experience drop in value at the expense of outside investors. According to
the opinion of the employees of the Chinese companies, it can be seen that 41.7 percent of the
employees agree to the fact. Moreover, 33.3 percent of the employees have given neutral
opinions. Thus, a large percentage of the employees do not have much of an idea about the effect