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Does financial deleveraging affect governments’ desirability of privatization? Evidence from the Chinese listed local SOEs

Does financial deleveraging affect governments’ desirability of privatization? Evidence from the... The rapid growth of local SOEs in China largely depends on high leverage, thus local governments and their SOEs will face harder budget constraints when the central bank implements tight credit policies. Using a sample of listed local SOEs in the Chinese A-share market, this paper attempts to investigate the relationship between financial deleveraging and privatization of local SOEs. We find that privatization of the Chinese local SOEs increases significantly during financial deleveraging, and this effect is more pronounced among SOEs with less tax contribution, fewer employees and that cause greater financial burden to the local governments. This paper broadens the research on environmental factors that drive politicians to privatize. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Economics Taylor & Francis

Does financial deleveraging affect governments’ desirability of privatization? Evidence from the Chinese listed local SOEs

Journal of Applied Economics , Volume 26 (1): 1 – Dec 31, 2023
20 pages

Does financial deleveraging affect governments’ desirability of privatization? Evidence from the Chinese listed local SOEs

Abstract

The rapid growth of local SOEs in China largely depends on high leverage, thus local governments and their SOEs will face harder budget constraints when the central bank implements tight credit policies. Using a sample of listed local SOEs in the Chinese A-share market, this paper attempts to investigate the relationship between financial deleveraging and privatization of local SOEs. We find that privatization of the Chinese local SOEs increases significantly during financial deleveraging,...
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Publisher
Taylor & Francis
Copyright
© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
ISSN
1667-6726
eISSN
1514-0326
DOI
10.1080/15140326.2023.2220468
Publisher site
See Article on Publisher Site

Abstract

The rapid growth of local SOEs in China largely depends on high leverage, thus local governments and their SOEs will face harder budget constraints when the central bank implements tight credit policies. Using a sample of listed local SOEs in the Chinese A-share market, this paper attempts to investigate the relationship between financial deleveraging and privatization of local SOEs. We find that privatization of the Chinese local SOEs increases significantly during financial deleveraging, and this effect is more pronounced among SOEs with less tax contribution, fewer employees and that cause greater financial burden to the local governments. This paper broadens the research on environmental factors that drive politicians to privatize.

Journal

Journal of Applied EconomicsTaylor & Francis

Published: Dec 31, 2023

Keywords: Financial deleveraging; privatization; local state-owned enterprises

References