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Corruption in Chinese Privatizations

Author

Listed:
  • Raymond Fisman
  • Yongxiang Wang

Abstract

We document evidence of corruption in Chinese state asset sales. These sales involved stakes in partially privatized firms, providing a benchmark—the price of publicly traded shares—to measure underpricing. Underpricing is correlated with deal attributes associated with misgovernance and corruption. Sales by "disguised" owners that misrepresent their state ownership to elude regulatory scrutiny are discounted 5–7 percentage points more than sales by other owners; related party transactions are similarly discounted. Analysis of subsequent operating performance provides suggestive evidence that aggregate ownership transfers improve profitability, though not in cases where the transfers themselves were corrupted. (JEL D73, G30, L33).

Suggested Citation

  • Raymond Fisman & Yongxiang Wang, 2015. "Corruption in Chinese Privatizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(1), pages 1-29.
    • Handle: RePEc:oup:jleorg:v:31:y:2015:i:1:p:1-29.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewu003
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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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