LIQUIDITY, MANAGEMENT EFFORT AND PERFORMANCE

This research examines reform in China. We argue the reform will lead the socialist-market-economy into capitalism. Reform offers opportunities to alter ownership of equity and frees management from control of the communist party. This research discusses the relation between market liquidity, investment decision and financial performance. The results from an analysis of 1002 firms show that reforms have significant impacts on the investment decisions. We discover there is a nonlinear relationship between market liquidity and financial performance. We argue this explains a high ratio of tradable-shareholders shareholdings. We divide tradable shareholders into five groups by different ranges ownership percentage. The results were significant but the directions of influence in each group were different. We suggest that the province-policy may be an important variable in the future research.