Political determinants of privatizations in China: A natural experiment based on politician career concerns

Zhangkai Huang; Jinyu Liu; Guangrong Ma; Lixin Colin Xu

doi:10.1016/j.jcorpfin.2024.102620

Political determinants of privatizations in China: A natural experiment based on politician career concerns

Zhangkai Huang^1,2,3,4; Jinyu Liu^1,2,3,4; Guangrong Ma^1,2,3,4; Lixin Colin Xu^1,5,2,3,4

¹ University of International Business and Economics · ² World Bank Group · ³ Renmin University of China · ⁴ Tsinghua University · ⁵ Cheung Kong Graduate School of Business

Journal of Corporate Finance 2024 open access

We study the political determinants of the world's largest privatization program by exploiting an age-related discontinuity of politician promotion in China. As a local politician's age exceeds 58, his promotion likelihood quickly diminishes. Consistent with changes in the politician's incentives, we find that Chinese cities whose top officials were older than age 58 were less likely to privatize local state-owned enterprises. Using the promotion discontinuity as an instrument, we report that privatization has significant effects on the firm's efficiency.

DOI: 10.1016/j.jcorpfin.2024.102620
Volume: 87
Pages: 102620
Language: en
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