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What Causes Privatization? Evidence from Import Competition in China

Author

Listed:
  • Qing Hu

    (School of Finance, Renmin University of China, Beijing 100872, China)

  • Wenjing Li

    (School of Management, Jinan University, Guangzhou 510632, China)

  • Chen Lin

    (Faculty of Business and Economics, University of Hong Kong, Pokfulam, Hong Kong SAR)

  • Lai Wei

    (Faculty of Business, Lingnan University, Tuen Mun, Hong Kong SAR)

Abstract

In this paper, we identify product market competition as a driver of privatization. Using product market shocks caused by trade liberalization of China, which has the world’s largest state sector, we find that subjecting state-owned enterprises (SOEs) to higher competition leads to an increase in private ownership. This response is strengthened when SOEs operate in industries with large technology or productivity gaps from those in the frontier economies or when SOEs impose large fiscal burdens on local governments. Our findings are consistent with politicians’ incentives to boost economic growth for better career development and to shed burdens when rents decrease.

Suggested Citation

  • Qing Hu & Wenjing Li & Chen Lin & Lai Wei, 2024. "What Causes Privatization? Evidence from Import Competition in China," Management Science, INFORMS, vol. 70(5), pages 3080-3101, May.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:5:p:3080-3101
    DOI: 10.1287/mnsc.2023.4847
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