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Why do Chinese local governments transfer their rights of control over SOEs to the central government?

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  • Weixing Cai
  • Fangming Xu
  • Cheng (Colin) Zeng

Abstract

This article investigates local authorities' motives for transferring their rights of control over state-owned enterprises (SOEs) to the central government. Using a difference-in-difference approach, we find that both employment and investment improves significantly following such transfers, and these findings are more pronounced among firms located in regions where the political pressure on local officials is higher. However, we fail to find any significant improvement in profitability. Our findings suggest that local governments tend to alleviate the political pressure they face by giving up their control rights and even sacrifice long-term economic benefits to do so.

Suggested Citation

  • Weixing Cai & Fangming Xu & Cheng (Colin) Zeng, 2015. "Why do Chinese local governments transfer their rights of control over SOEs to the central government?," Applied Economics Letters, Taylor & Francis Journals, vol. 22(15), pages 1252-1256, October.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:15:p:1252-1256
    DOI: 10.1080/13504851.2015.1023931
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    Cited by:

    1. Jim Huangnan Shen & Weiping Li & Chien‐Chiang Lee, 2023. "Unlocking the myths of size expansion in China's large state‐owned enterprises: Theory and evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1264-1284, March.

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