Abstract
We provide evidence on the relation between divestiture strategies of state owned firms and market valuations. The Chinese market liberalisation represents an exogenous change in state ownership that should have no bearing on the timing of equity offerings and market conditions. Our results show that the reduction of state ownerships is strongly associated with market valuations with the firms choosing to reduce ownership at times when valuation levels are high. We also find that the proceeds from equity offerings are expended more in the form of opportunistic and discretionary usage than investment requirements.
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