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Banks and Enterprise Privatization in China

Author

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  • Loren Brandt
  • Hongbin Li
  • Joanne Roberts

Abstract

Drawing on a unique dataset we collected in 1998 and 2000, this article examines the determinants of privatization of township and village enterprises in China. Our theoretical model explicitly considers the role of banks in determining privatization. We find that improved human capital and incentives of bank managers as well as deteriorating bank liquidity lead to privatization. We also analyze the conditions under which shutdown might be preferred to privatization as a method to divest of government-owned firms. We find empirical evidence that is consistent with our model's predictions. Copyright 2005, Oxford University Press.

Suggested Citation

  • Loren Brandt & Hongbin Li & Joanne Roberts, 2005. "Banks and Enterprise Privatization in China," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(2), pages 524-546, October.
    • Handle: RePEc:oup:jleorg:v:21:y:2005:i:2:p:524-546
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    File URL: http://hdl.handle.net/10.1093/jleo/ewi022
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    Citations

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    Cited by:

    1. Chen, Zhao & Poncet, Sandra & Xiong, Ruixiang, 2020. "Local financial development and constraints on domestic private-firm exports: Evidence from city commercial banks in China," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 56-75.
    2. Li, Lixing, 2008. "Employment burden, government ownership and soft budget constraints: Evidence from a Chinese enterprise survey," China Economic Review, Elsevier, vol. 19(2), pages 215-229, June.
    3. Tong, Sarah Y., 2009. "Why privatize or why not? Empirical evidence from China's SOEs reform," China Economic Review, Elsevier, vol. 20(3), pages 402-413, September.
    4. Kung, James Kai-sing & Lin, Yi-min, 2007. "The Decline of Township-and-Village Enterprises in China's Economic Transition," World Development, Elsevier, vol. 35(4), pages 569-584, April.
    5. Pei Sun & Kamel Mellahi & Guy Liu, 2011. "Corporate governance failure and contingent political resources in transition economies: A longitudinal case study," Asia Pacific Journal of Management, Springer, vol. 28(4), pages 853-879, December.
    6. Zhao, Zhen-yu & Zhang, Shuang-Ying & Hubbard, Bryan & Yao, Xue, 2013. "The emergence of the solar photovoltaic power industry in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 21(C), pages 229-236.
    7. Fumitoshi Mizutani & Shuji Uranishi, 2010. "Determinants of privatization of public corporations: evidence from the Japanese experience," Empirical Economics, Springer, vol. 39(2), pages 515-535, October.
    8. Hongbin Li & Scott Rozelle & Li‐An Zhou, 2007. "Incentive contracts and bank performance," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 109-124, January.
    9. Marcus Conlé, 2011. "Tracing the Process of Property Rights Specification in China: The Case of New Technology Enterprises," Chapters, in: Werner Pascha & Cornelia Storz & Markus Taube (ed.), Institutional Variety in East Asia, chapter 3, Edward Elgar Publishing.
    10. Liu, Guy S. & Sun, Pei & Woo, Wing Thye, 2006. "The Political Economy of Chinese-Style Privatization: Motives and Constraints," World Development, Elsevier, vol. 34(12), pages 2016-2033, December.
    11. Liu, Guy S. & Sun, Pei & Wing Thye Woo, 2007. "What motivates and constrains politicians to privatize? The case of China," Economics Letters, Elsevier, vol. 97(1), pages 81-86, October.
    12. Xiaohan Guo & Jianliang Ye & Wunhong Su & Deming Luo & Xiangrong Jin, 2022. "Do zombie firms crowd out healthy firms and slow their growth? Evidence from China," Development Policy Review, Overseas Development Institute, vol. 40(6), November.

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