NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Corruption in Chinese Privatizations

Raymond Fisman, Yongxiang Wang

NBER Working Paper No. 20090
Issued in May 2014
NBER Program(s):   CF   DEV   POL

We document evidence of corruption in Chinese state asset sales. These sales involved stakes in partially privatized firms, providing a benchmark - the price of publicly traded shares - to measure underpricing. Underpricing is correlated with deal attributes associated with misgovernance and corruption. Sales by "disguised" owners that misrepresent their state ownership to elude regulatory scrutiny are discounted 5-7 percentage points more than sales by other owners; related party transactions are similarly discounted. Analysis of subsequent operating performance provides suggestive evidence that aggregate ownership transfers improve profitability, though not in cases where the transfers themselves were corrupted.

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Document Object Identifier (DOI): 10.3386/w20090

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