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The reversal of privatization in China: A political economy perspective

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  • Huang, Zhangkai
  • Li, Lixing
  • Ma, Guangrong
  • Qian, Jun

Abstract

We document reversals of privatization in China—local governments re-possessing ownership stakes in a quarter of previously privatized firms during 1998–2007, a period when the privatization process was still ongoing. This type of ownership restructuring helped ease the unemployment burden in the local labor markets, and was more likely to occur in firms located in provinces led by an official without strong political status in the Chinese Communist Party. A reversal in privatization led to higher leverage, lower profitability and lower labor productivity. Our paper sheds light on how frictions in the political structure affect the implementation of economic policies in a top-down system.

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  • Huang, Zhangkai & Li, Lixing & Ma, Guangrong & Qian, Jun, 2021. "The reversal of privatization in China: A political economy perspective," Journal of Corporate Finance, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:corfin:v:71:y:2021:i:c:s0929119921002376
    DOI: 10.1016/j.jcorpfin.2021.102115
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    More about this item

    Keywords

    Privatization; Reversal; Political status; Profitability; Unemployment;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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