The real effect of partial privatization on corporate innovation: Evidence from China's split share structure reform

By Yong Tan, X. Tian, Xinde Zhang, Hailong Zhao. Journal of Corporate Finance, 2020

225 citations recorded by the source corpus.

We examine the real effect of privatization in terms of technological innovation. To address endogeneity concerns, we explore plausibly exogenous variation in privatization generated by a quasi-natural experiment, China’s split share structure reform, which mandatorily converts non tradable shares to be freely tradable and opens up the gate to the privatization of state-owned enterprises (SOEs). Using a difference-in-differences approach, we find that the expectation of privatization has a positive effect on firm innovation. We further show that better interest alignments between controlling and minority shareholders and enhanced stock price informativeness are two plausible underlying mechanisms through which privatization prospects promote innovation. Our paper sheds new light on the real effect of privatization and has important implications for policymakers who aim to promote technological innovation.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/54c121e0c221dd0154ed3ebfd2339f984fb419c3

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In Accounting

1. Yongjia Lin
2. Xiaolan Fu
3. X. Fu
4. Yong Tan

In Economics and Econometrics

1. Yongjia Lin
2. Xiaolan Fu
3. X. Fu

Citations in the corpus

• Varieties in state capitalism and corporate innovation: Evidence from an emerging economy (2021, methodology): “Both indicators have been widely used in the innovation literature to capture innovation capacity (Griliches, 1990; Lerner and Wulf, 2007; Fan et al., 2017; Tan et al., 2020, among others).”