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Full privatization through controlling rights transfer in China: the extent of its success

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  • Yunxia Bai
  • Bing-Xuan Lin
  • Yaping Wang
  • Liansheng Wu

Abstract

This article investigates the effect of the second step of privatization in China, which is full privatization through controlling rights transfer after share issue partial privatization. It finds that fully privatized firms perform worse than state-controlled enterprises. Expropriation by private block shareholders is greater than that by state block shareholders. Furthermore, increase in expropriation is negatively related to performance change. The results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal system. They also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization.

Suggested Citation

  • Yunxia Bai & Bing-Xuan Lin & Yaping Wang & Liansheng Wu, 2013. "Full privatization through controlling rights transfer in China: the extent of its success," Applied Economics, Taylor & Francis Journals, vol. 45(14), pages 1857-1867, May.
    • Handle: RePEc:taf:applec:45:y:2013:i:14:p:1857-1867
    DOI: 10.1080/00036846.2011.639742
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    References listed on IDEAS

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    1. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
    2. David Martimort & Stephane Straub, 2006. "Privatization and Changes in Corruption Patterns: The Roots of Public Discontent," Edinburgh School of Economics Discussion Paper Series 147, Edinburgh School of Economics, University of Edinburgh.
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    Cited by:

    1. Bin Liu & Charles Cullinan & Junrui Zhang & Fangjun Wang, 2016. "Loan guarantees and the cost of debt: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 48(38), pages 3626-3643, August.

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