Banks and Enterprise Privatization in China

Posted: 12 Jul 2005

See all articles by Loren Brandt

Loren Brandt

University of Toronto - Department of Economics; IZA Institute of Labor Economics

Hongbin Li

Chinese University of Hong Kong - Department of Economics

Joanne Roberts

University of Toronto - Department of Economics

Abstract

Drawing on a unique dataset we collected in 1998 and 2000, this article examines the determinants of privatization of township and village enterprises in China. Our theoretical model explicitly considers the role of banks in determining privatization. We find that improved human capital and incentives of bank managers as well as deteriorating bank liquidity lead to privatization. We also analyze the conditions under which shutdown might be preferred to privatization as a method to divest of government-owned firms. We find empirical evidence that is consistent with our model's predictions.

Keywords: Privatization, township and village enterprises, financial institutions

JEL Classification: G32, G34, L32, P20, P31

Suggested Citation

Brandt, Loren and Li, Hongbin and Roberts, Joanne, Banks and Enterprise Privatization in China. The Journal of Law, Economics, and Organization, Vol. 21, No. 2, pp. 524-546, 2005. Available at SSRN: https://ssrn.com/abstract=754888

Loren Brandt (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4442 (Phone)
416-978-6713 (Fax)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Hongbin Li

Chinese University of Hong Kong - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Joanne Roberts

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

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