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Non-credible privatization

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  • Zhangkai Huang

Abstract

This paper analyzes government incentives in privatization and shows that governments' cheap talk results in non-credible policy. Ex-post, only bad firms will take a sequential strategy in privatization, which will reveal its type and lead to a price drop. These results are used to analyse China's share issue privatization plan and market reaction to it.

Suggested Citation

  • Zhangkai Huang, 2006. "Non-credible privatization," Applied Economics Letters, Taylor & Francis Journals, vol. 13(14), pages 957-959.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:14:p:957-959
    DOI: 10.1080/13504850500426152
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    References listed on IDEAS

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    1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    4. Shleifer, Andrei, 1986. "Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-590, July.
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