Why Don't Share Issue Privatizations Improve Profitability in China?

60 Pages Posted: 6 Apr 2017 Last revised: 27 Nov 2017

See all articles by Bo Li

Bo Li

Shantou University

William L. Megginson

University of Oklahoma

Zhe Shen

Xiamen University

Qian Sun

Fudan University

Date Written: November 25, 2017

Abstract

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

Li, Bo and Megginson, William L. and Shen, Zhe and Sun, Qian, Why Don't Share Issue Privatizations Improve Profitability in China? (November 25, 2017). 30th Australasian Finance and Banking Conference 2017. Available at SSRN: https://ssrn.com/abstract=2946766 or http://dx.doi.org/10.2139/ssrn.2946766

Bo Li

Shantou University ( email )

243 Daxue Road
Shantou, Guangdong, Guangdong 515063
China

William L. Megginson (Contact Author)

University of Oklahoma ( email )

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

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Zhe Shen

Xiamen University ( email )

School of Management
422 Siming South Road
Xiamen, Fujian 361005
China

Qian Sun

Fudan University ( email )

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

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