Insider Privatization With A Tail: The Buyout Price And Performance Of Privatized Firms In Rural China
AbstractThis paper studies insider privatization in transition economies. We show theoretically that the underperformance of insider-privatized firms could be due to the manager-cum-owner's lack of incentives after privatization. A screening theory predicts that a firm's postprivatization incentives increase with the firm's buyout price. The empirical results show that the buyout price decreases with the degree of information asymmetry and that a firm's postprivatization performance increases with the buyout price. We also find that the performance of premium-paying firms converges with that of private firms after privatization; in contrast, heavily discounted firms perform indistinguishably from government-owned firms.
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Bibliographic InfoPaper provided by University of California, Davis, Department of Agricultural and Resource Economics in its series Working Papers with number 11968.
Date of creation: 2001
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