Abstract

We analyze related party transactions between Chinese publicly listed firms and their state-owned enterprise (SOEs) shareholders to examine whether companies benefit from the presence of government shareholders and politically connected directors appointed by the government. We find that minority shareholders seem to be expropriated in firms controlled by local government SOEs, firms with a large proportion of local government affiliated directors on their board, and firms in provinces where local government bureaucrats are less likely to be prosecuted for misappropriation of state funds. In contrast, firms controlled by the central government (or with a large proportion of central government affiliated directors) are benefited in their related party transactions with their central government SOEs.