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The impact of large public sales of Government assets: empirical evidence from the Chinese stock markets on a gradual and offer-to-get approach

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  • Yan Zeng
  • Josie McLaren

Abstract

In June 2001, the Chinese Government announced proposals to reduce its retained ownership in listed Chinese state-owned enterprises. In the 3 months following the announcement, the market fell by 40 % and as a consequence, in 2002 the programme was cancelled. The Government learnt lessons and in April 2005 it launched a revised plan to sell its shares, known as the Full Circulation Reform. The new reform was carefully guided by official document releases, trialled with a pilot programme, and then extended to the majority of firms in groups over a 2-year period. The process was known as a gradual, offer-to-get approach. At the firm-level, each reforming company gradually implemented the sale of its Government-held shares through one negotiation stage and one voting stage. Part of the negotiation stage centred on the compensation that would be paid by the Government to the public shareholders to ensure that the reforms went through. This paper investigates market reactions around the critical event dates in the reform process and the underlying dynamics. The results show that this reform had positive impact on prices, indicating the gradual and offer-to-get approach was very successful and Government objectives for the sale were met. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Yan Zeng & Josie McLaren, 2015. "The impact of large public sales of Government assets: empirical evidence from the Chinese stock markets on a gradual and offer-to-get approach," Review of Quantitative Finance and Accounting, Springer, vol. 45(1), pages 137-173, July.
    • Handle: RePEc:kap:rqfnac:v:45:y:2015:i:1:p:137-173
    DOI: 10.1007/s11156-014-0433-9
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    More about this item

    Keywords

    Chinese state-owned enterprises; Split-Share Structure Reform; Gradualism; Offer-to-get approach; Consideration; C14; C31; G14; G15; G18;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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