Complex Organizational Structure and Chinese Firm Value

The rapid economic development in recent years inspired Chinese firms to entertain global ambitions, and growing domestic competition as a result of the government’s liberalization policies has rendered internationalization a necessity. In addition to the State-owned enterprises that already had complex structures from government-mandated privatization, many large private companies developed complex organizational structures as well to fulfill the demands of the changing operating environment. Some reincorporated outside of the country and registered new subsidiaries in China to gain legal and tax advantages. Some formed joint ventures with foreign firms to learn the most advanced technologies. Some established branches overseas. These efforts seemed to have paid off. In 2009, 37 companies made it to the Fortune Global 500 list of the largest companies in the world by revenue compared to 16 in 2005. But along with the expansion, the more pertinent question for shareholders is whether there has been commensurate growth in their holdings, specifically, how does the new complex firm structure affect firm value?