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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. 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.
    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. Shleifer, Andrei, 1986. "Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-590, July.
    4. 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.
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