China share issue privatization: the extent of its success

Abstract

We evaluate the performance changes of 634 state-owned enterprises (SOEs) listed on China's two exchanges upon share issuing privatisation (SIP) in the period 1994-1998. We find that SIP is effective in improving SOEs' earnings ability, real sales, and workers' productivity but is not successful in improving profit returns and leverage after privatisation. We also find state ownership having negative impacts on firm performance and legal-person ownership having positive impacts on firm performance after SIP, which suggests that legal persons behave differently from the state government. Surprisingly, foreign ownership does not show uniformly strong, positive impacts on firm performance. r

Tournaments and managerial incentives in China's listed firms: New evidence

“…The total prize may be larger, however, for equity 11 See, for instance, Sun and Tong (2003), Bai, et. al.…”

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

“…Indeed, a major reason behind the creation of the stock exchanges was to improve the economic performance of the listed former SOEs (Sun & Tong, 2003;Tenev & Zhang, 2002 diffusion in complete privatization, having the state as a large shareholder can help to monitor and control management decisions (Jefferson, 1998;Lin, Cai, & Li, 1998). Second, a large state ownership may signal the state's confidence in the firm's future performance (Mok & Hui, 1998).…”

“…The first issue is what internal and external corporate governance mechanisms have been empirically investigated as well as the relative level of attention/coverage they have received. The second issue is the effectiveness of in the smaller ones to managers, workers, or outside investors (Sun & Tong, 2003;Tenev & Zhang, 2002).…”

Structural Changes in the Chinese Stock Market: A Review of Empirical Research

“…One salient feature of the ownership structure in partial privatisation is that the government remains the largest controlling shareholder in privatised firms (Sun and Tong, 2003) and usually its ownership far exceeds that of the second largest shareholder. Specifically, on average, state-owned shares and legal person shares (indirectly owned by the government) accounted for 70% of the total number of shares in Chinese listed firms during the sample period 1998-2004 (before the reform of non-tradable shares).…”

“…Table 1 shows that the empirical results are generally consistent with the hypothesis of an efficiency gain after the partial privatisation of SOEs. The increase in minority private ownership is shown to be associated with higher perceived firm value (Wei, Xie, and Zhang, 2005); higher profit reinvestment rate (Cull and Xu, 2005); higher discount rate in making investment decisions (Liu and Siu, 2011); improved firm's earnings ability, real sales, and workers' productivity (Sun and Tong, 2003); better transparency of firm's specific information (Gul, Kim, and Qiu, 2010); lower earnings management ; higher pay-for-performance sensitivity (Cao, Pan, and Tian, 2011); higher accounting conservatism ; and the choice of higher quality auditors (Wang, Wong, and Xia, 2008). The primary argument is that the stock market provides incentives for investors to gather information that is reflected in share price and this information can improve managerial incentives in a number of ways.…”