**Hypothesis 3 (H3).** *The positive relationship between ownership concentration and firm financial performance has increased after the split-share structure reform.*

As mentioned above, new studies have started to investigate the impact of (state) ownership concerning the contextual environment. It is argued that the effect of state ownership on corporate performance can be better interpreted concerning the present institutional factors in the country [61,108,109]. In this regard, Borisova et al. [110], for instance, find that the negative relationship between state ownership and governance is related to contexts with an ineffective legal system. In contrast, as Estrin et al. [108] found, positive implications of state ownership can emerge in contexts with effective formal legal and informal institutions.

It is crucial to investigate the effect of economic policy and regulation changes on the SO–corporate performance relationship in this context. In this regard, Hanousek et al. [111], for example, note that, following the adoption of privatization programs, state ownership is less likely to improve corporate performance compared to private ownership. In the context of China, Wei and Varela [6] reported a negative association between state ownership and the financial performance of the recently privatized companies in 1994. Using a sample of companies registered on the Shanghai Stock Exchange as of year-end 2004, Jiang et al. [39] analyzed the effect of tradable share proportion and the state-owned share proportion on company performance before the stock split reform. The government-owned share proportion is reported to have a linear and positive influence on corporate performance. They found that the state ownership–firm performance relationship modifies when the percentage of tradable shares is accounted for in the analyses. Hou and Lee [8] noted that the 2005 stock split reform in China eliminated the trading restrictions for state owners. They also concluded that the stock split reform enhanced the incentive alignment between state and private owners, motivating them to monitor management. The present study uses a newer and more extensive data set to contribute to this debate by examining the SO–firm financial performance relationship related to 2005 s stock split reform by testing the following (fourth) hypothesis:

**Hypothesis 4 (H4).** *The negative relationship between state ownership and firm financial performance has decreased after the split-share structure reform.*

#### **5. Study Design**

#### *5.1. Sample Size*

As shown in Table 1, the initial sample of this study comprises all firms listed on the Shanghai and Shenzhen Stock Exchanges from 2004 to 2013, totaling 2536 firms. After screening, 1544 firms were excluded, leaving 992 state-owned firms, by using the classification of ownership nature. For consistency and reliability reasons, this paper excludes 36 listed firms that issue B- and H-type shares and financial and public utilities firms— 108 firms in total [112]. Following Del Bo et al. [113], this paper eliminates 66 sample data points with a ratio of state ownership of less than 20% in the initial year of the data sample. This paper also eliminates 13 firms with abnormal trading status, which are marked as ST firms. Finally, we exclude 350 firms with incomplete data. The final sample of this paper retained 234 firms, having 2340 annual observation values. All data were collected from

the China Stock Market and Accounting Research database (CSMAR). Although our study uses ten years of panel data, it contains far fewer observations prior to the reform than what is considered after the reform due to data availability.

**Table 1.** Sample selection.

