The Structure of Corporate Groups: The Hong Kong Case

• In Event: Reception with ELS and Research Interaction Forum Posters
  In Poster Session: Research Interaction Forum

Abstract

The Hong Kong stock market is one of the largest in the world in terms of market capitalization. Hong Kong has been considering the introduction of a group taxation regime for the past few years. However, there is no detailed study which examines the popularity of corporate group structure in Hong Kong. This paper intends to fill the gap by analysing the corporate group structures of 300 companies – 100 each from large, medium and small companies – listed in the Hong Kong Stock Exchange.

The research finds that the corporate group structure is very common in Hong Kong. Almost all of the sample companies have at least one controlled entity (“CE”). Furthermore, the corporate structures tend to be complex. On average, each sample company has 31 CEs. Also, large companies (measured by market capitalization) tend to have more complex group structures (measured by the number of CEs). With respect to ownership thresholds, over 75% of the CEs of the 300 sample companies are wholly owned subsidiaries, and approximately 85% of the CEs are at least 75% owned. Results of this study are relevant to the design of a group taxation regime in Hong Kong, if the government decides to introduce it. The popularity of the corporate group structure in Hong Kong lends support to the call for the government to seriously consider the introduction of a group taxation regime in order to enhance the competitiveness of Hong Kong for business investment.

Authors

• Hoi Ki Daniel Ki HO, Hong Kong Baptist University

• Antony Ting, The University of Sydney Business School