Abstract
This paper argues that the documented post-share issue privatization (SIP) decline in profitability is not evidence per se that China’s SIP program is ineffective or unsuccessful. Instead, the positive privatization effect is often outweighed by a negative listing effect. We employ a triple difference approach to separate these two effects, and examine a sample of 248 Chinese SIPs from 1999-2009 matched with otherwise comparable SOEs and privately-owned firms. We document a negative listing effect since ROS of privatelyowned firms tends to decline after going public by 2.6% and their EBIT/Sales by 3.8%. After adjusting for this negative listing effect, however, we show that China’s SIP program yields significantly improved profitability (ROS and EBIT/Sales), and find this result is robust to alternative specifications. Our study highlights the need to account for the listing effect in analyzing performance improvements following share issue privatizations--which have accounted for the bulk of China’s listed companies and market capitalization.
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