INSIDER PRIVATIZATION WITH A TAIL: THE BUYOUT PRICE AND PERFORMANCE OF PRIVATIZED FIRMS IN RURAL CHINA

Hongbin Li and Scott Rozelle

No 11968, Working Papers from University of California, Davis, Department of Agricultural and Resource Economics

Abstract: This paper studies insider privatization in transition economies. We show theoretically that the underperformance of insider-privatized firms could be due to the manager-cum-owner's lack of incentives after privatization. A screening theory predicts that a firm's postprivatization incentives increase with the firm's buyout price. The empirical results show that the buyout price decreases with the degree of information asymmetry and that a firm's postprivatization performance increases with the buyout price. We also find that the performance of premium-paying firms converges with that of private firms after privatization; in contrast, heavily discounted firms perform indistinguishably from government-owned firms.

Keywords: Political; Economy (search for similar items in EconPapers)
Pages: 49
Date: 2001
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucdavw:11968

DOI: 10.22004/ag.econ.11968

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