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Privatization and optimal share release in the Chinese banking industry

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  • Chen, Chien-Hsun
  • Mai, Chao-Cheng
  • Liu, Yu-Lin
  • Mai, Shin-Ying

Abstract

This paper establishes a mixed oligopoly model to explore how the government determines the percentage of shares of the state-owned banks to be released to foreign investors under the goal of seeking to maximize social welfare. The theoretical model finds that the release of shares of state-owned banks to foreign investors will reduce the outputs of the state-owned banks. The direction of the change in the profitability of the state-owned banks depends on the percentage of the shares released. The direction of the changes in the levels of social welfare also varies. If the gap in production efficiency between the state-owned banks and private banks is not large enough, we can be certain that a partial release of shares is the government's best policy.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 6 (November)
Pages: 1161-1171

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Handle: RePEc:eee:ecmode:v:26:y:2009:i:6:p:1161-1171

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Privatization Mixed oligopoly model Foreign equity participation China's financial sector Optimal share release;

References

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Citations

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Cited by:
  1. Chen, Pei-Fen & Liu, Ping-Chin, 2013. "Bank ownership, performance, and the politics: Evidence from Taiwan," Economic Modelling, Elsevier, vol. 31(C), pages 578-585.
  2. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.
  3. Walailuck Chavanasporn & Christian-Oliver Ewald, 2012. "Privatization of businesses and flexible investment: a real option approach," Decisions in Economics and Finance, Springer, vol. 35(1), pages 75-89, May.
  4. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.

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