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Going (More) Public: Institutional Isomorphism and OwnershipReform among Chinese Firms

Published online by Cambridge University Press:  02 February 2015

Heather A. Haveman
University of California-Berkeley, USA
Yongxiang Wang
University of Southern California, USA


Publicly traded Chinese firms recently reformed their ownership structuresby converting non-tradable shares, which constituted two-thirds of sharesoutstanding and were held largely by the state, into shares that could tradeon domestic exchanges. To facilitate this reform, tradable shareholders werecompensated with stock grants from non-tradable shareholders. Our analysisfocuses on the level of compensation, the compensation ratio, the ratio of new tradable shares granted to tradableshares outstanding before the reform. Contrary to the predictions ofasset-pricing models, most firms set the compensation ratio around 0.3. Weexplain this surprising convergence using institutional theory. In doing so,we analyze the power and interests of all relevant actors – not just owners,but also state regulators, executives, and other agents — and draw oninsights from resource-dependence and agency theories. We find strongevidence of coercive and mimetic isomorphism, but no evidence of normativeisomorphism. Because our dependent variable is continuous (a ratio), we areable to show that the mimetic effects we observe cannot be attributed tocoercion or norms. Thus, we not only explain an empirical puzzle, we alsoadvance institutional analysis of isomorphism by clearly distinguishingthree isomorphic forces that have been conflated in much previousresearch.

Copyright © International Association for Chinese Management Research 2013

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