We　examine　the　effect　of　minority　state　ownership　on　firm　performance　using　the　Chinese　stock　market　crash　in　2015.　We　find　that　treatment　firms　with　minority　state　ownership　accumulated　from　governmental　purchases　of　equities　experience　significant　reductions　in　operating　performance.　The　negative　impact　is　more　severe　in　firms　with　higher　riskiness　and　firms　with　less　powerful　large　shareholders.　We　also　find　that　treatment　firms’　risk　decreases　and　their　employment　increases　after　minority　state　shareholders　step　in,　providing　supportive　evidence　on　the　government＇s　motives　of　reducing　risk　and　preventing　mass　layoffs.　Further　tests　reveal　the　channels　through　which　minority　state　ownership　impedes　investment　efficiency,　productivity,　and　innovation.　The　negative　impact　diminishes　when　government　institutions　divest　their　shares　in　a　timely　manner.　Overall,　our　results　suggest　there　are　unintended　negative　consequences　of　minority　state　ownership　arising　from　the　governmental　rescue　package　in　a　market　crisis.　©　2023　Financial　Management　Association　International.