State-Owned Capital Participation and Opportunistic Insider Selling of Private Enterprises: Evidence from China

This study explores the association between state-owned capital participation (SOCP) and opportunistic insider selling using data on China’s A-share private enterprises from 2007 to 2022. We document that SOCP can significantly inhibit opportunistic insider selling by improving the company’s information environment and curbing executive myopia. The heterogeneity tests indicate that the inhibiting effect is significant only among firms with weak external supervision or among firms situated in regions with high speculative culture. We also find that the inhibiting effect mainly stems from non-financial state-owned shareholders’ participation and is only effective in curbing opportunistic insider selling by insiders rather than by their relatives. This study also finds that SOCP increases firm value by restraining opportunistic insider selling. Our findings extend to our understanding of the governance effect of reverse mixed-ownership reform by focusing on opportunistic inside selling behavior.