 Political and economic incentives of government in partial privatizationZhaohua Li and Takeshi Yamada () Journal of Corporate Finance, 2015, vol. 32, issue C, 169-189 Abstract: This study examines the government's incentives to control partially privatized SOEs in share issue privatization in China. In addition to controlling firms in strategic industries, in certain geographical areas, and that have related party transactions, our result shows that government selects and controls firms that have better valuations and employs more workers vis-à-vis comparable private firms. Particularly, local governments, which are more likely to face hard budget constraints, might spend the profits of government controlled firms to hire more workers (Boycko et al., 1996), suggesting that government pursues efficiency and political objectives simultaneously. Our study finds that local governments prefer to control relatively more efficient firms that hire more workers, while central government prefer to controls firms that hire more workers regardless of efficiency. We estimate the impact of government's decision on firm valuations and employment and find a pronounced economic impact to preserve employment and a limited impact to improve efficiency. Keywords: Partial privatization; Political objectives; State ownership; Employment; Chinese economy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:32:y:2015:i:c:p:169-189 DOI: 10.1016/j.jcorpfin.2014.04.008 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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