Government share ownership, investment opportunity set and corporate policy choices in China

This study, using pooled cross-sectional observations of companies listed on the Shanghai Stock Exchange from 1990 to 1995, examines the relationship between government ownership of shares, growth opportunities measured in terms of the investment opportunity set IOS and corporate policy decisions. IOS is measured in terms of three Ž . ratios; market value of the firm to book value of assets, market value of equity to book value of equity and the earnings price ratio. Corporate policy choices are defined in terms of leverage and dividend policies. Government ownership is found to be positively associated with debt financing and dividend policy. Consistent with prior studies, IOS is found to be negatively associated with debt financing and dividend payments.