Does Reverse Mixed Ownership Affect Management Emotion? Evidence from Private Firms in China

The entry of state ownership into private firms remains a contentious issue in transitioning economies. By focusing on private firms, this paper contends that reverse mixed ownership leads to management of optimistic emotions through better corporate governance or incremental resource acquisition. Furthermore, conditional analyses present that private firms involving state capital do not engage in tone management, higher financial constraints, and more excessive employment should weaken the positive impact. In addition, we perform DID analysis to observe the effect of supportive policies on private firms and find substitution effect between exogenous policy shock and ownership reform. Through qualitative information contained in MD&A, this paper discusses a new factor affecting management emotion and proposes that listed firms should discard the prejudice on the nature of property rights and leverage the unique advantages of diverse types of owners.