The Impact of Corruption on State Asset Sales - Evidence from China
35 Pages Posted: 23 Mar 2009
Date Written: March, 18 2009
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: Suggested Citation