Does the class of shareholdings matter for corporate performance? To address the question, our
paper starts by classifying shareholdings on the basis of the principle of ultimate ownership. At
present, the shareholding structure of Chinese quoted companies is state-dominant in that 84% of
public companies ultimately are found controlled by the state, compared with 16% of non-statecontrolled
ones. In contrast to our identified shareholdings, the Chinese official shareholding
record only reports the state and the legal person share classes that are inevitably ambiguous for
the identification of ultimate owners of public corporations, which in turn has misled many
previous studies in assessing the impact of shareholding classes on performance. Based on our
newly established shareholding classes, we make a nested performance comparison between these
different classes, such as the state direct control versus the state indirect control, and find
significant evidence from the Chinese data that the class of shareholdings does matter for
company performance. The least inefficient shareholding class is the holding companies that are
wholly listed and have focused industrial business through the state indirect control of the
downstream public corporations. This finding provides ground for us to think more about how the
corporate control mechanism could be further improved in China’s current corporate governance
reform