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Journal of Corporate Finance Vol. 87 2024

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

Zhangkai Huang1,2,3,4; Jinyu Liu1,2,3,4; Guangrong Ma1,2,3,4; Lixin Colin Xu1,5,2,3,4

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

open access

Abstract

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
Sources
openalex crossref

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