The impact of government regulation and ownership on the performance of securities companies: Evidences from China

We study the impacts of government regulation and ownership on the performance of Chinese securities firms. Consistent with the grapping hand hypothesis, we find a negative relationship between direct government ownership and performance. In addition, we find that business entry qualifications enhance the performance of security firms, since regulatory control of business entry keeps potential competition away. Our study provides important policy implications. As China slowly adapts to a more liberal financial system, it needs to consider the delicate balance between government regulations and free market conducts. Furthermore, it needs to address the increasing concern of the impairment on performance due to government ownership. © 2005 Elsevier Inc. All rights reserved