Corporate governance of Chinese privatized firms: Evidence from a survey of non-listed enterprises

Abstract

By using a dataset containing over 1200 Chinese non-listed firms, this study examines the corporate governance of privatized firms. Based on the summary statistics for 22 governance structures, I find that privatized domestic private firms have set up stronger governance than domestic private firms that have not experienced privatization. I propose seven hypotheses to explain the leading performance of privatized firms on corporate governance. I find that while some differences are explained by the diversity of firm-level characteristics, privatized firms’ better performance on setting up a board of directors and providing the CEO with company shares is highly robust. Finally, I find strong correlations between local governments’ fiscal conditions in the privatization year and privatized firms’ governance, which suggests a significant role played by local governments in shaping corporate governance during the privatization process.