The Political Economy of Corporate Finance: Evidence from ‘Re-nationalization’ in China

42 Pages Posted: 5 Aug 2014

See all articles by Zhangkai Huang

Zhangkai Huang

Tsinghua University - School of Economics & Management

Lixing Li

Peking University - China Center for Economic Research (CCER)

Guangrong Ma

Peking University; Renmin University of China - School of Finance

Jun Qian

Fanhai International School of Finance, Fudan University; University of Pennsylvania - Wharton Financial Institutions Center

Multiple version iconThere are 2 versions of this paper

Date Written: August 4, 2014

Abstract

We investigate the power structure of the Chinese political system and its implications on corporate sectors. We document large-scale ‘re-nationalization’ — local government re-possessing controlling ownership stakes in previously privatized firms during the period 1999-2007. Firms located in provinces with newly appointed, top-ranked Communist Party leaders who are not affiliated with any of the dominant political factions are more likely to be re-nationalized. With a number of instrument variables including the political status of the top-ranked provincial Party leader, we find that re-nationalization leads to lower profitability and labor productivity. While re-nationalization temporarily lowers the unemployment rate in the region, it does not appear to have any long-term economic benefits.

Keywords: Re-nationalization, privatization, political faction, unemployment, productivity

JEL Classification: G32, H11, P31, L22

Suggested Citation

Huang, Zhangkai and Li, Lixing and Ma, Guangrong and Qian, Jun, The Political Economy of Corporate Finance: Evidence from ‘Re-nationalization’ in China (August 4, 2014). Available at SSRN: https://ssrn.com/abstract=2475733 or http://dx.doi.org/10.2139/ssrn.2475733

Zhangkai Huang

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Lixing Li

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, 100871
China

Guangrong Ma

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Renmin University of China - School of Finance

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

Jun Qian (Contact Author)

Fanhai International School of Finance, Fudan University ( email )

Shanghai
China
86-21-63895501 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.fisf.fudan.edu.cn/show-65-69.html

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States

HOME PAGE: http://fic.wharton.upenn.edu/fic/

Register to save articles to
your library

Register

Paper statistics

Downloads
172
Abstract Views
1,296
rank
65,467
PlumX Metrics