Can a Tiger Change its Stripes? Reform of Chinese State-Owned Enterprises in the Penumbra of the State

43 Pages Posted: 23 Jan 2019 Last revised: 5 Feb 2019

See all articles by Ann E. Harrison

Ann E. Harrison

University of Pennsylvania - Management Department; National Bureau of Economic Research (NBER)

Marshall W. Meyer

University of Pennsylvania - Management Department

Will Wang

University of Pennsylvania - The Wharton School

Linda Zhao

University of Pennsylvania - Statistics Department

Minyuan Zhao

University of Pennsylvania

Date Written: January 2019

Abstract

The majority of state-owned enterprises (SOEs) in China were privatized through ownership reforms over the last two decades. Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2013, we show that privatized SOEs continue to benefit from government support relative to private enterprises. Compared to private firms that were never state-owned, privatized SOEs are favored by low interest loans and government subsidies. These differences are more salient with the Chinese government’s trillion-dollar stimulus package introduced after the 2008 global financial crisis. Moreover, both SOEs and privatized SOEs significantly under-perform in profitability compared to private firms. Nevertheless there are clear improvements in performance post-privatization. The tiger can change its stripes; however, the government’s behavior seems to be sticky.

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Suggested Citation

Harrison, Ann E. and Meyer, Marshall W. and Wang, Peichun and Zhao, Linda and Zhao, Minyuan, Can a Tiger Change its Stripes? Reform of Chinese State-Owned Enterprises in the Penumbra of the State (January 2019). NBER Working Paper No. w25475. Available at SSRN: https://ssrn.com/abstract=3319806

Ann E. Harrison (Contact Author)

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marshall W. Meyer

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

Peichun Wang

University of Pennsylvania - The Wharton School ( email )

3620 Locust Walk
3000 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States

Linda Zhao

University of Pennsylvania - Statistics Department ( email )

Wharton School
Philadelphia, PA 19104
United States

Minyuan Zhao

University of Pennsylvania ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

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