The Impact of Corruption on State Asset Sales - Evidence from China

35 Pages Posted: 23 Mar 2009

See all articles by Yongxiang Wang

Yongxiang Wang

Columbia University - Columbia Business School

Raymond J. Fisman

National Bureau of Economic Research (NBER); Boston University

Date Written: March, 18 2009

Abstract

We document the under-pricing of state asset sales in China. Because these stakes were in partially privatized firms, there is a credible benchmark - the price of publicly traded shares - to measure the extent of under-pricing. On average, we find that blocks of government shares sell at a discount of more than 70 percent relative to tradable shares. Further, sellers that conceal their state ownership status (likely in order to elude regulatory scrutiny) sell at a further 5 percentage point discount. The impact on subsequent performance is negative - both profitability and investment fall after transfers. We also document patterns in the data consistent with increased tunneling after asset sales.

Keywords: Privatization, corruption, tunneling, China

JEL Classification: L33, O16, P33

Suggested Citation

Wang, Yongxiang and Fisman, Raymond, The Impact of Corruption on State Asset Sales - Evidence from China (March, 18 2009). AFA 2010 Atlanta Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1364740 or http://dx.doi.org/10.2139/ssrn.1364740

Yongxiang Wang

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Raymond Fisman (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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