Purpose This study first explores – the possible dynamic relationship between ownership structure and firm performance using a panel of 4,900 Chinese-listed small- and medium-sized enterprises (SMEs) from 1999 to 2012.
Research design, data, and methodology – We address this issue through a dynamic panel model using a method of moments (GMM) technique and dynamic simultaneous equations to alleviate the potential endogenous problem: unobserved heterogeneity, simultaneity, and dynamic endogeneity.
Results – Under the framework of dynamic endogeneity, firm performance has a significantly positive influence on ownership, but not vice versa. Ownership and performance can be explained by their owned lagged values, respectively. Moreover, intertemporal endogeneity exists among ownership, investment, and performance through the application of system dynamic equations, which implies that the relationship among ownership structure, investment, and firm performance is dynamic by nature.
Conclusions – This study also significantly contributes to a better understanding of dynamic corporate governance by providing further empirical evidence from the largest capital market in the Asian region.

1. Introduction
2. Literature Reviews and Hypothesis Development
3. Methodology
4. Data and key variable
5. Model test
6. Empirical Result
7. Robustness Check
8. Conclusion
References

• Lin Shao(School of Finance, QiLu Technology University, Jinan, China.) Corresponding Author
• Xiaohong Yu(School of Economics and Management, Shandong Yingcai University, Jinan, China)