Profiting from government stakes in a command economy
Subtitle: evidence from chinese asset sales
By: Charles Calomiris, Raymond Fisman, Yongxiang Wang.
Contributors: Fisman, Raymond.; Wang, Yongxiang.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13774; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13774.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We document the market response to an unexpected announcement of proposed sales of government-owned shares in China.  In contrast to the "privatization premium" found in earlier work, we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect in response to the announced cancellation of the government sell-off.  We argue that this results from the absence of a Chinese political transition to accompany economic reforms, so that the positive effects on profits of political ties through government ownership outweigh the potential efficiency costs of government shareholdings.  Companies with former government officials in management have positive abnormal returns, suggesting that personal ties can substitute for the benefits of government ownership.  The "privatization discount" is higher for firms located in Special Economic Zones, where local government discretionary authority is highest.  This is consistent with the view that firms in these locations are more dependent on government connections.  We also find that companies with relatively high welfare payments to employees, which presumably would fall with privatization, benefit disproportionately from the privatization announcement"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/12/2008.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.