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China’s Decentralized Privatization and Change of Control Rights

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  • Xu, Cheng-Gang
  • Gan, Jie
  • Guo, Yan

Abstract

A distinct feature of China’s privatization is that its design and implementation are decentralized and administered by the local governments. Based on a proprietary survey dataset containing 3,000 firms in over 200 cities, this paper studies how city governments choose among various privatization methods, how these methods transfer control rights, and how they influence privatization outcomes. We find that less political opposition to labor downsizing and greater fiscal capacity prompt cities to choose direct sales to insiders (MBOs) as their privatization method. This method transfers the most control rights to private owners, retains the least government supports and is associated with most hardened budget constraints, restructure most effectively, and achieves the greatest performance improvement.

Suggested Citation

  • Xu, Cheng-Gang & Gan, Jie & Guo, Yan, 2017. "China’s Decentralized Privatization and Change of Control Rights," CEPR Discussion Papers 11854, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11854
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    Citations

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    Cited by:

    1. Allen, Franklin & Qian, Jun & Qian, Meijun, 2018. "A Review of China’s Institutions," CEPR Discussion Papers 13269, C.E.P.R. Discussion Papers.
    2. 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).
    3. Han, Haozhe & Zhang, Shuo, 2023. "How does people’s liberation army related business closure affect the local economy?," China Economic Review, Elsevier, vol. 77(C).
    4. Bach Nguyen & Hoa Do & Chau Le, 2022. "How much state ownership do hybrid firms need for better performance?," Small Business Economics, Springer, vol. 59(3), pages 845-871, October.
    5. Liu, Jinyu & Wang, Zhengwei & Zhu, Wuxiang, 2021. "Does privatization reform alleviate ownership discrimination? Evidence from the Split-share structure reform in China," Journal of Corporate Finance, Elsevier, vol. 66(C).

    More about this item

    Keywords

    Privatization; Chinese economy; Control rights; Restructuring;
    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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