Why Don’t Share Issue Privatizations Improve Profitability in China?
Asian Finance Association (AsianFA) 2017 Conference
60 Pages Posted: 27 Jan 2017 Last revised: 27 Nov 2017
Date Written: November 25, 2017
Previous studies show that profitability does not improve after share issue privatization (SIP) in China. We explore the possibility that the positive privatization effect can be overwhelmed by a negative listing effect, leading to an overall negative or insignificant SIP profitability change. Using the difference-in-differences approach with various matched samples, we show that there is a positive privatization effect and there is a negative listing effect on profitability. We also document evidence of a significant improvement in profitability after separating the “pure” privatization effect from the SIP effect. Our findings are robust to alternative variable specifications and methodological changes.
Keywords: Privatization, Listing, Difference-in-differences, Government policy and regulation
JEL Classification: G32, G38, G15
Suggested Citation: Suggested Citation