The Real Effect of Partial Privatization on Corporate Innovation: Evidence from China’s Split Share Structure Reform

56 Pages Posted: 10 May 2014 Last revised: 1 Jun 2020

See all articles by Yongxian Tan

Yongxian Tan

University of Otago

Xuan Tian

Tsinghua University - PBC School of Finance

Xinde Zhang

University of Arkansas - Department of Finance

Hailong Zhao

Southwestern University of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 30, 2020

Abstract

We examine the real effect of partial privatization on corporate innovation. To establish causality, we explore plausibly exogenous variation in the expectation of further partial privatization generated by China’s split share structure reform, which mandatorily converts non-tradable shares into freely tradable shares and opens up the gate to the further privatization of state-owned enterprises. We find that partial privatization prospects have a positive effect on corporate innovation. A better alignment of the interests of government agents with those of private shareholders and improved stock price informativeness appear to be two plausible underlying mechanisms. Our paper sheds new light on the real effects of partial privatization.

Keywords: Privatization; Innovation; Interest alignments; Stock price informativeness

JEL Classification: G30; G38; O32; L33

Suggested Citation

Tan, Yongxian and Tian, Xuan and Zhang, Xinde and Zhao, Hailong, The Real Effect of Partial Privatization on Corporate Innovation: Evidence from China’s Split Share Structure Reform (May 30, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2433824 or http://dx.doi.org/10.2139/ssrn.2433824

Yongxian Tan

University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Xinde Zhang (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

Hailong Zhao

Southwestern University of Finance and Economics ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

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