Publication Type

Journal Article

Publication Date

6-2009

Abstract

Previous studies show that in contrast to evidence that share issue privatization (SIP) in most other countries have improved firm profitability, China's SIP of the 1990s had no such effect. We argue that the main reason for the failure of China's SIP is likely to have been the weak institutional environment in place at that time. We examine China's SIP in a more recent period in which the institutional environment was greatly improved. Using a matching sample method, we find that SIP firms continued to experience negative post-SIP profitability changes in our sample period. However, their performance decline was significantly less than that of their matched non-SIP SOEs. We also find that the introduction of the independent director rule helped to improve firm performance. Our results reconcile the findings of the SIP effect in China with international evidence and illustrate the importance of a developed capital market to ensuring the success of privatization schemes.

Keywords

Share Issue Privatization, State-owned Enterprise, Profitability, China

Discipline

Asian Studies | International Business

Research Areas

Accounting Information System

Publication

Journal of Banking and Finance

Volume

33

Issue

12

First Page

2322

Last Page

2332

ISSN

0378-4266

Identifier

10.1016/j.jbankfin.2009.06.008

Publisher

Elsevier

Additional URL

http://doi.org./10.1016/j.jbankfin.2009.06.008

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