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Political determinants of privatizations in China: A natural experiment based on politician career concerns

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  • Huang, Zhangkai
  • Liu, Jinyu
  • Ma, Guangrong
  • Xu, Lixin Colin

Abstract

We study the political determinants of the world's largest privatization program by exploiting an age-related discontinuity of politician promotion in China. As a local politician's age exceeds 58, his promotion likelihood quickly diminishes. Consistent with changes in the politician's incentives, we find that Chinese cities whose top officials were older than age 58 were less likely to privatize local state-owned enterprises. Using the promotion discontinuity as an instrument, we report that privatization has significant effects on the firm's efficiency.

Suggested Citation

  • Huang, Zhangkai & Liu, Jinyu & Ma, Guangrong & Xu, Lixin Colin, 2024. "Political determinants of privatizations in China: A natural experiment based on politician career concerns," Journal of Corporate Finance, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:corfin:v:87:y:2024:i:c:s0929119924000828
    DOI: 10.1016/j.jcorpfin.2024.102620
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    More about this item

    Keywords

    Privatization; Career concern; Politicians; China;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • H19 - Public Economics - - Structure and Scope of Government - - - Other
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P39 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Other

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