What Causes Privatization? Evidence from Import Competition in China

Qing HU, Wenjing LI, Chen LIN, Lai WEI*

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

In this paper, we identify product market competition as a driver of privatization. Using product market shocks caused by trade liberalization of China, which has the world’s largest state sector, we find that subjecting state-owned enterprises (SOEs) to higher competition leads to an increase in private ownership. This response is strengthened when SOEs operate in industries with large technology or productivity gaps from those in the frontier economies or when SOEs impose large fiscal burdens on local governments. Our findings are consistent with politicians’ incentives to boost economic growth for better career development and to shed burdens when rents decrease.
Original languageEnglish
Number of pages22
JournalManagement Science
Early online date21 Jun 2023
DOIs
Publication statusPublished - 21 Jun 2023

Bibliographical note

We thank Tomasz Piskorski (the editor), the associate editor, two anonymous referees, Andrew Ellul, Ross Levine, Micah Officer, Thomas Schmid, Yuhai Xuan, and the participants of the 2018 China Finance Annual Conference and seminar at the University of Hong Kong for their helpful comments and suggestions. Lin acknowledges the financial support from the National Natural Science Foundation of China (No. 72192841). Hu acknowledges the financial support from the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (No. 21XNF002). Li acknowledges the financial support from the Major Project of the Ministry of Education (No. 22JZD007) and the National Natural Science Foundation of China (No. 72132002). Lai acknowledges the financial support of the Early Career Scheme of the Hong Kong Research Grants Council (No. 23500417).

Cite this