CHINA FINANCIAL RESEARCH NETWORK
2010-07-15 第3卷 第4期
the Chinese University of Hong KongDepartment of Finance
University of British ColumbiaSauder School of Business
Ming Liu the Chinese University of Hong KongDepartment of Finance
We investigate the choice problem in the massive Chinese restructuring campaign that has been described as “grasping the large and letting go of the small,” in which a third of the million or so Chinese state-owned enterprises were either corporatized or privatized. Corporatization differs from privatization in the Chinese context, as in the former case the state remains a large shareholder, whereas in the latter case it has little or no ownership. Using a panel of provincial level statistics, we show that greater local employment pressure, less local fiscal pressure, and a more corrupt local business environment all lead to a lesser likelihood that privatization will be chosen over corporatization. Privatization is found to yield consistent efficiency gains over corporatization in terms of employment and firm profitability. Our evidence is supportive of the theoretical framework of Boycko, Shleifer, and Vishny (1996), who model privatization as an endogenous decision in which politicians trade off employment pressure against public fiscal interest.
Dale Griffin University of British ColumbiaSauder School of Business
We investigate the role of managers’ country of origin in leverage decisions using data on foreign joint ventures in China. By focusing on foreign joint ventures in a single country, we are able to hold constant the financing environment, eliminate the effects of formal institutions in the foreign managers’ home country, and consequently reveal the effects of informal institutions such as national culture on corporate finance decisions. Using cultural values of embeddedness, mastery, and uncertainty avoidance to explain country of origin effects, we find that national culture has significant explanatory power in the financial leverage decisions of foreign joint ventures in China. Country-level variation is evident in capital structure and appears to work through choices of firm characteristics, industry affiliation, ownership structure, and region of investment.
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