State-Owned Enterprise's Ownership Reform

1 Problems with the Insider Control in the Chinese SOEs Under Pyramidal Holding Structure

DOI: 10.4324/9781003361404-2

In terms of the basic form of corporate governance, SOEs, together with their controlling parent companies and grandparent companies, constitute a large-scale enterprise group, which is under a pyramidal holding structure with different size and complexity.

The extended principal-agent chain resulting from the pyramidal holding structure not only further aggravates the institutional defects of the SOE owner’s absence, “spending someone else’s money on someone else” but also gives rise to potential negative economic, political and social effects. It may be time for China’s capital market to say no to the pyramidal structure. ...