Privatization and optimal share release in the Chinese banking industry

Chien-Hsun Chen, Chao-Cheng Mai, Yu-Lin Liu and Shin-Ying Mai

Economic Modelling, 2009, vol. 26, issue 6, 1161-1171

Abstract: This paper establishes a mixed oligopoly model to explore how the government determines the percentage of shares of the state-owned banks to be released to foreign investors under the goal of seeking to maximize social welfare. The theoretical model finds that the release of shares of state-owned banks to foreign investors will reduce the outputs of the state-owned banks. The direction of the change in the profitability of the state-owned banks depends on the percentage of the shares released. The direction of the changes in the levels of social welfare also varies. If the gap in production efficiency between the state-owned banks and private banks is not large enough, we can be certain that a partial release of shares is the government's best policy.

Keywords: Privatization; Mixed; oligopoly; model; Foreign; equity; participation; China's; financial; sector; Optimal; share; release (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:26:y:2009:i:6:p:1161-1171

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