Regional Unemployment and the Restructuring of Distressed State-owned Enterprises: Evidence from China

Fuxiu Jiang, Min Zhang, Wen Zhang and Xiaoqiang Zhi

Emerging Markets Finance and Trade, 2014, vol. 50, issue S6, 69-86

Abstract: Using Chinese listed companies as the sample, we investigate the effects and corresponding consequences of regional unemployment rates on the restructuring behavior of distressed state-owned enterprises (SOEs). We find that layoffs and asset downsizing of local SOEs will be limited greatly when the unemployment rates of the areas where SOEs are located are high, even though these firms are already in distress. Additional evidence shows that this kind of limitation causes these firms to show a long-term decline in performance. The CEOs of these firms, however, are not easily dismissed after the distress. These results provide empirical support for the “grabbing hand“ theory.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:50:y:2014:i:s6:p:69-86

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DOI: 10.1080/1540496X.2014.1013850

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