Statistics on VIE usage 2018 | China Accounting Blog | Paul Gillis

Statistics on VIE usage 2018

This is a guest post from Fredrik Oqvist, a former student who has long focused on VIEs. Fredrik has posted this on his blog.

After a number of requests from professionals and people in academia I decided to use the summer to renew my statistics on VIE usage. As the last one waspublished in 2011, it seemed like it was about time.

I used a list I foundonlineand added in newer IPOs and cleaned up some delistings etc., but as I don’t have access to Bloomberg I can’t guarantee I was able to find all the US-listed Chinese companies. If someone has a better list please feel free to send it over and I’ll update the statistics based on that. All the data was lifted from SEC filings, and encompasses the NYSE and NASDAQ listed Chinese companies.

Although the total number of companies in my sample is down significantly, the percentage of companies using VIEs is up by quite a margin. Given that newer listings, even in 2011, display a higher percentage of VIE usage overall, this is not very surprising, but it does highlight that the importance of understanding VIE structures is if anything more important now than before.


The pattern we see here is pretty similar to what we saw in 2011 with higher concentration of VIEs in the more tech-heavy NASDAQ bourse. Overall this trend seems to have intensified, and when we move onto the breakdown by industry sector we see that this also follows suit. The previously VIE heavy sectors have become even more VIE heavy. And the VIE heavy sectors are also in general the ones of most interest to investors with the internet, e-commerce, education, and newcomer finance sectors featuring heavily.

I rejigged the industry breakdown slightly to provide a hopefully useful comparison for percentages of assets and revenues that go through the VIEs for each industry. It should be noted that the data-points for these numbers don’t always correspond to the number of companies in the category as there are still significant differences in the quality of VIE disclosures, with some missing the necessary data.

Overall we see that there is a massive difference in how VIE structures look, and how they are used by companies. As the structures differ so does the nature of the risk investors are taking when they buy into these companies. As a whole it’s important that we move away from discussing VIE risk as binary and move towards a more detailed and nuanced view.

As there seems to be some renewed interest surrounding VIEs, with them featuring in some short reports and coming in for some renewed criticism, I will throw up a couple of more posts based onsomeof the data I collected. I won’t delve too far into the details of the risk-assessment data, but there are some other things I’d like to highlight more generally.

Given the prevalence of VIE structures, especially in the more interesting parts of the Chinese economy, it’s important that investors understand what they are and how they impact risk exposure. To my admittedly biased view investing in Chinese companies without understanding VIE structures is takin to being a normal investor and not understanding how corporate governance or equity

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