Do Share Issue Privatizations Really Improve Firm Performance in China?

36 Pages Posted: 2 Nov 2015

See all articles by Bo Li

Bo Li

Shantou University

William L. Megginson

University of Oklahoma

Zhe Shen

Xiamen University

Qian Sun

Fudan University

Multiple version iconThere are 2 versions of this paper

Date Written: October 30, 2015


This paper argues that the documented post-share issue privatization (SIP) decline in profitability of divested Chinese companies is not evidence per se that China’s SIP program is ineffective or unsuccessful. Instead, the positive privatization effect is often outweighed by a negative listing effect. We employ a triple difference approach to separate these two effects, and examine a sample of 248 Chinese SIPs from 1999-2009 matched with otherwise comparable SOEs and privately-owned firms. We document a negative listing effect since ROS of privately-owned firms tends to decline after going public by 2.6% and their EBIT/Sales by 3.8%. After adjusting for this negative listing effect, however, we show that China’s SIP program yields significantly improved profitability (ROS and EBIT/Sales), and find this result is robust to alternative specifications. Our study highlights the need to account for the listing effect in analyzing performance improvements following share issue privatizations -- which have accounted for the bulk of China’s listed companies and market capitalization.

Keywords: Privatization, International financial markets, Government policy and regulation

JEL Classification: G32, G38, G15

Suggested Citation

Li, Bo and Megginson, William L. and Shen, Zhe and Sun, Qian, Do Share Issue Privatizations Really Improve Firm Performance in China? (October 30, 2015). Available at SSRN: or

Bo Li

Shantou University ( email )

243 Daxue Road
Shantou, Guangdong, Guangdong 515063

William L. Megginson

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)


Zhe Shen (Contact Author)

Xiamen University ( email )

School of Management
422 Siming South Road
Xiamen, Fujian 361005

Qian Sun

Fudan University ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
86 21 25011094 (Phone)

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