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Ultimate privatization and change in firm performance: Evidence from China

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  • Huang, Zhangkai
  • Wang, Kun

Abstract

We extend the current empirical literature on privatization by exploring the effect of ultimate privatization on the performance of Chinese listed companies. Ultimate privatization is defined as the incidence of transferring the ultimate control of a state-owned company from the government to private owners. Using a sample of 127 Chinese listed companies that have had controlling blocks transferred from the government to private owners, we show that firm performance improved significantly following this transfer. In addition, gains in profitability and efficiency are more prominent when the new controlling shareholder is an "outsider", one who does not own shares in the company prior to the transfer of control. Our results suggest that the Chinese government should continue to reduce its controlling ownership in listed companies, as the transfer of control to private owners enhances operating efficiency and profitability.

Suggested Citation

  • Huang, Zhangkai & Wang, Kun, 2011. "Ultimate privatization and change in firm performance: Evidence from China," China Economic Review, Elsevier, vol. 22(1), pages 121-132, March.
  • Handle: RePEc:eee:chieco:v:22:y:2011:i:1:p:121-132
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    2. Feng Xie & Jing Chi & Jing Liao, 2016. "From share issue privatisation to non-tradable share reform: a review of privatisation in China," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 30(2), pages 90-104, November.
    3. Yaseen Ghulam, 2018. "Is the Improved Financial Performance after Broader Reforms and Privatisation Long-Lasting and Uniform Across Industries?," Review of Economics & Finance, Better Advances Press, Canada, vol. 13, pages 77-92, August.
    4. Jan Hagemejer & Joanna Tyrowicz, 2020. "A New Instrument for Measuring the Local Causal Effect of Privatisation on Firm Performance," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 35-52.
    5. Ghulam, Yaseen, 2017. "Long-run performance of an industry after broader reforms including privatization," Research in International Business and Finance, Elsevier, vol. 42(C), pages 745-768.
    6. Hu, Jinshuai & Jiang, Haiyan & Wu, Yibing, 2023. "How does privatization affect cash dividends? Quasi-experimental evidence from China," Emerging Markets Review, Elsevier, vol. 57(C).
    7. Wang, Kun Tracy & Shailer, Greg, 2022. "Multiple performance criteria for government-controlled firms," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 75-96.
    8. Shailer, Greg & Wang, Kun, 2015. "Government ownership and the cost of debt for Chinese listed corporations," Emerging Markets Review, Elsevier, vol. 22(C), pages 1-17.
    9. Ruijie Jin & Helen Wei Hu, 2024. "Liability of Ownership Origin, Corporate Philanthropy, and Desire for Control in Chinese Family Firms," Entrepreneurship Theory and Practice, , vol. 48(3), pages 763-787, May.
    10. Ghulam, Yaseen & Jaffry, Shabbar, 2015. "Efficiency and productivity of the cement industry: Pakistani experience of deregulation and privatisation," Omega, Elsevier, vol. 54(C), pages 101-115.
    11. Guoqian Tu & Frank Yu, 2015. "Tunneling or Not? The Change of Legal Environment on the Effect of Post-Privatization Performance," Journal of Business Ethics, Springer, vol. 129(2), pages 491-510, June.
    12. Belkhir, Mohamed & Ben-Nasr, Hamdi, 2016. "Labor protection and the privatization or partial privatization method," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 305-322.

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