Share issuing privatizations in China: Sequencing and its effects on public share allocation and underpricing
Share issuing privatizations (SIPs) in China are partial in nature and involve the sale of newly issued shares. Using data on 521 Chinese SIPs during 1994-2005, this paper investigates the firm and stock market characteristics that determine the fraction of shares sold to the general public and the degree of underpricing at SIP. We find that in the early stages of SIP, highly leveraged and heavily subsidized state-owned enterprises issue more new shares. Variables capturing the firm's financing needs from investment opportunities positively affect public share allocation, whereas internal cash generation has a negative impact, but only in later years. The determinants of underpricing further illustrate the uniqueness of SIPs compared with private-firm IPOs in developed countries. Overall, there is little evidence that uncertainty over the value of firm assets influences first-day abnormal returns. In contrast, variables measuring government commitment to privatization significantly affect underpricing. Finally, we document that public share allocation and underpricing are jointly determined, especially in more recent years, after the quota system was abolished and lower-quality firms were privatized. Journal of Comparative Economics 37 (2) (2009) 306-320.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
- Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
- Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
- Michel Habib & Alexander Ljungqvist, 1999.
"Underpricing and Entrepreneurial Wealth Losses in IPOs: Theory and Evidence,"
OFRC Working Papers Series
1999fe03, Oxford Financial Research Centre.
- Habib, Michel A & Ljungqvist, Alexander P, 2001. "Underpricing and Entrepreneurial Wealth Losses in IPOs: Theory and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 433-58.
- Tian, Lihui & Estrin, Saul, 2008. "Retained state shareholding in Chinese PLCs: Does government ownership always reduce corporate value?," Journal of Comparative Economics, Elsevier, vol. 36(1), pages 74-89, March.
- Wei, Zuobao & Xie, Feixue & Zhang, Shaorong, 2005. "Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 87-108, March.
- Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
- Pagano, Marco & Panetta, Fabio & Zingales, Luigi, 1996.
"Why Do Companies Go Public? An Empirical Analysis,"
CEPR Discussion Papers
1332, C.E.P.R. Discussion Papers.
- Marco Pagano & Fabio Panetta & Luigi Zingales, . "Why Do Companies Go Public? An Empirical Analysis," CRSP working papers 330, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Marco Pagano & Fabio Panetta & Luigi Zingales, 1995. "Why Do Companies Go Public? An Empirical Analysis," NBER Working Papers 5367, National Bureau of Economic Research, Inc.
- Konings, Jozef & Rizov, Marian & Vandenbussche, Hylke, 2003. "Investment and financial constraints in transition economies: micro evidence from Poland, the Czech Republic, Bulgaria and Romania," Economics Letters, Elsevier, vol. 78(2), pages 253-258, February.
- Lihui Tian, 2001. "Government Shareholding and the Value of China's Modern Firms," William Davidson Institute Working Papers Series 395, William Davidson Institute at the University of Michigan.
- Dewatripont, Mathias & Roland, Gerard, 1995.
"The Design of Reform Packages under Uncertainty,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1207-23, December.
- Dewatripont, Mathias & Roland, Gérard, 1993. "The Design of Reform Packages Under Uncertainty," CEPR Discussion Papers 860, C.E.P.R. Discussion Papers.
- Mathias Dewatripont & Gérard Roland, 1995. "The design of reform packages under uncertainty," ULB Institutional Repository 2013/9607, ULB -- Universite Libre de Bruxelles.
- Mok, Henry M. K. & Hui, Y. V., 1998. "Underpricing and aftermarket performance of IPOs in Shanghai, China," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 453-474, November.
- Chan, Kalok & Wang, Junbo & Wei, K. C. John, 2004. "Underpricing and long-term performance of IPOs in China," Journal of Corporate Finance, Elsevier, vol. 10(3), pages 409-430, June.
- Huyghebaert, Nancy & Van Hulle, Cynthia, 2006. "Structuring the IPO: Empirical evidence on the portions of primary and secondary shares," Journal of Corporate Finance, Elsevier, vol. 12(2), pages 296-320, January.
- Su, Dongwei, 2004. "Leverage, insider ownership, and the underpricing of IPOs in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(1), pages 37-54, February.
- Nandini Gupta & John Ham & Jan Svejnar, 2000.
"Priorities and Sequencing in Privatization: Theory and Evidence from the Czech Republic,"
Econometric Society World Congress 2000 Contributed Papers
1580, Econometric Society.
- Nandini Gupta & John C. Ham & Jan Svejnar, 2000. "Priorities and Sequencing in Privatization: Theory and Evidence from the Czech Republic," William Davidson Institute Working Papers Series 323, William Davidson Institute at the University of Michigan.
- Chen, Gongmeng & Firth, Michael & Kim, Jeong-Bon, 2004. "IPO underpricing in China's new stock markets," Journal of Multinational Financial Management, Elsevier, vol. 14(3), pages 283-302, July.
- Perotti, Enrico C, 1995. "Credible Privatization," American Economic Review, American Economic Association, vol. 85(4), pages 847-59, September.
- Xiaozu Wang & Lixin Colin Xu & Tian Zhu, 2004. "State-owned enterprises going public "The case of China"," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 467-487, 09.
- Jefferson, Gary H, 1998. "China's State Enterprises: Public Goods, Externalities, and Coase," American Economic Review, American Economic Association, vol. 88(2), pages 428-32, May.
When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:37:y:2009:i:2:p:306-320. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.