TY - JOUR AU - Calomiris,Charles AU - Fisman,Raymond AU - Wang,Yongxiang TI - Profiting from Government Stakes in a Command Economy: Evidence from Chinese Asset Sales JF - National Bureau of Economic Research Working Paper Series VL - No. 13774 PY - 2008 Y2 - February 2008 UR - http://www.nber.org/papers/w13774 L1 - http://www.nber.org/papers/w13774.pdf N1 - Author contact info: Charles W. Calomiris Graduate School of Business Columbia University 3022 Broadway Street, Uris Hall New York, NY 10027 Tel: 212/854-8748 Fax: 212/316-9219 E-Mail: cc374@columbia.edu Raymond Fisman School of Business Columbia University 622 Uris Hall 3022 Broadway New York, NY 10027 Tel: 212/854-9157 Fax: 212-316-9219 E-Mail: rf250@columbia.edu Yongxiang Wang Marshall School of Business University of Southern California Los Angeles, CA 90089 E-Mail: Yongxiang.Wang@marshall.usc.edu AB - We document the market response to an unexpected announcement of proposed sales of government-owned shares in China. In contrast to the "privatization premium" found in earlier work, we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect in response to the announced cancellation of the government sell-off. We argue that this results from the absence of a Chinese political transition to accompany economic reforms, so that the positive effects on profits of political ties through government ownership outweigh the potential efficiency costs of government shareholdings. Companies with former government officials in management have positive abnormal returns, suggesting that personal ties can substitute for the benefits of government ownership. The "privatization discount" is higher for firms located in Special Economic Zones, where local government discretionary authority is highest. This is consistent with the view that firms in these locations are more dependent on government connections. We also find that companies with relatively high welfare payments to employees, which presumably would fall with privatization, benefit disproportionately from the privatization announcement. ER -