We examine whether engagement in rent-seeking improves firm value in China. Rent-seeking is defined as a firm's use of resources to establish a relationship with the government to obtain government-controlled resources. We incorporate political rents and associated costs into an analytical framework to examine the relationship between rent-seeking and firm value. Using a sample of non-state-owned firms listed on the Shenzhen Stock Exchange and the Shanghai Stock Exchange from 2007 to 2013, we find evidence of the presence of political rents in the form of government subsidies and evidence of associated costs in the forms of corporate philanthropy and excess management remuneration, which largely explains the insignificant relationship found between rent-seeking and firm value. Our further analysis shows that rent-seeking behavior of firms reduces production efficiency, providing additional evidence to support our thesis that engagement in rent-seeking does not enhance firm value in the Chinese context. In an economy with weak institutions, in particular with weak protection for shareholders, managers and politicians can become rent-seekers and take a considerable share of the economic benefits derived from rent-seeking.

This paper examines the relationship between blockholder ownership, dividend policy and firm value in the largest EU and US companies during 1988–1998. Large owners may benefit other shareholders by effectively controlling company managers, but may also differ from minority investors by a preference for retained earnings, from which they derive private benefits of control. This paper analyses these effects in a non-technical way using simple correlation analysis. The level of blockholder ownership in continental Europe is found to be much higher than in the US/UK, whereas firm value is somewhat lower. A negative association is found between blockholder ownership and firm value in continental Europe, which indicates that the level of blockholder ownership is excessive from a minority shareholder viewpoint. Moreover, although blockholder ownership levels in Europe are not generally associated with lower dividends, increases in blockholder ownership are found to be associated with decreasing dividends, and the stock market appears to respond more favourably to increasing dividends in companies with a high level of blockholder ownership. In the US/UK, higher blockholder ownership is generally associated with lower dividends, which are again negatively correlated with firm value. In both the EU and the US, the results therefore point to conflicts of interest between large blockholders and minority investors, but more strongly so in Europe.