This article investigates the effect of the second step of privatization in China, which is full privatization through controlling rights transfer after share issue partial privatization. It finds that fully privatized firms perform worse than state-controlled enterprises. Expropriation
by private block shareholders is greater than that by state block shareholders. Furthermore, increase in expropriation is negatively related to performance change. The results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal
system. They also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization.
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controlling rights transfer;
Document Type: Research Article
School of Economics and Management, Tongji University, Shanghai 200092, China
College of Business Administration, University of Rhode Island, Kingston,RI 02881, USA
Guanghua School of Management, Peking University, Beijing 100871, China
Publication date: 2013-05-01
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