China's Secondary Privatization: Perspectives from the Split-Share Structure Reform

Abstract:     
The Split-share Structure Reform, commenced in 2005, inaugurated China's secondary privatization. It dismantled the legacy dual share structure formed in the initial (partial) share issue privatization in the 1990s and, thus, opened up the gate to further privatizing listed state-owned enterprises (SOEs). This paper introduces this landmark event and evaluates its success in terms of improving firm performance and corporate governance. Evidence indicates significant improvements in the listed SOEs' output, profitability, employment, operating efficiency, and governance after the reform. In examining the drivers of this success, we find that the market mechanism adopted in the reform to help strike a balance between the government's agenda and public investor interests have played an important positive role. Our work provides important implications for China's future economic reforms and global privatization.

Number of Pages in PDF File: 53

Keywords: The Split-share Structure Reform, privatization, state-owned enterprise, corporate governance, firm performance

JEL Classification: G14, G30

working papers series