Influence of equity structure in China’s high-tech manufacturing industry on enterprise value under epidemic shocks

Key findings from this study

• The study found that instrumental variable correction reveals substantially larger negative effects of equity concentration on firm value than conventional OLS estimation, indicating significant downward bias in standard regression models.
• The authors report that traditional mediation analysis identifies R&D investment as a partial mediator (18–23% of total effect), but IV-based tests yield statistically insignificant indirect effects, demonstrating endogeneity sensitivity.
• The researchers demonstrate that equity concentration's detrimental effect on firm value was markedly attenuated during the COVID-19 pandemic period, suggesting macroeconomic shocks modify governance effectiveness.
• The study found that capital-intensive subsectors including aerospace and electronic equipment manufacturing exhibit the most pronounced negative associations between equity concentration and firm value.

Overview

This study examines how equity concentration affects firm value in China's high-tech manufacturing sector during 2019–2023, incorporating the COVID-19 pandemic as an exogenous shock. The research employs instrumental variable estimation on a balanced panel of 642 listed firms to address endogeneity bias in standard regression models. The analysis incorporates R&D investment as a potential mediating mechanism and identifies substantial industry-level heterogeneity in governance effects.

Methods and approach

Fixed-effects regression models and instrumental variable estimation techniques address endogeneity concerns in the relationship between equity structure and firm value. The dataset comprises 642 Chinese high-tech manufacturing firms over five years (2019–2023). Mediation analysis examines whether R&D investment transmits equity concentration effects on firm value. Industry-level stratification isolates differential effects across capital-intensive and other subsectors.

Results

Instrumental variable estimation yields a substantially larger negative coefficient for equity concentration (β = −13.105, p < 0.01) relative to OLS estimates, revealing pronounced downward bias in conventional regression. This finding indicates that equity concentration exerts more severe negative effects on firm value when endogeneity is properly addressed. Traditional mediation analysis attributes 18–23% of the total effect to R&D investment; however, IV-corrected mediation tests produce statistically insignificant indirect effects, demonstrating sensitivity of this channel to endogeneity correction.

The pandemic period exhibits attenuated negative associations between equity concentration and firm value, suggesting that macroeconomic shocks modify governance mechanisms' effectiveness. Capital-intensive subsectors—particularly aerospace and electronic equipment manufacturing—display the most pronounced negative relationships. This heterogeneity indicates that industry-specific structural characteristics substantially modulate how ownership concentration affects corporate value creation.

Implications

The substantial downward bias in OLS estimates argues for systematic adoption of IV methods in corporate governance research, particularly when examining endogenous ownership structures. Policymakers designing ownership regulations must account for industry-specific attributes and macroeconomic contexts, as governance mechanism effectiveness is highly contingent upon environmental conditions. The attenuated pandemic effects suggest that extreme external shocks reshape the relationship between ownership concentration and value creation, necessitating dynamic rather than static policy frameworks.

Corporate leaders optimizing equity structures should incorporate industry classification and current macroeconomic conditions into governance decisions. The insignificant mediation effects after endogeneity correction indicate that R&D investment channels merit reconsideration in future research. These findings establish that governance mechanisms operate within complex ecosystems where external conditions and industry structure fundamentally alter their impact on firm value.

Scope and limitations

This summary is based on the study abstract and available metadata. It does not include a full analysis of the complete paper, supplementary materials, or underlying datasets unless explicitly stated. Findings should be interpreted in the context of the original publication.