Corruption and privatization: Evidence from a natural experiment in China

Abstract

This paper investigates how government corruption shapes state-owned enterprises' (SOEs) privatization. To establish causality, we exploit a natural experiment (i.e., the investigations of the Central Commission for Discipline Inspection) to document that SOEs significantly deepen privatization after the crackdown on corruption. Further evidence demonstrates two plausible mechanisms driving our findings. Specifically, anti-corruption campaign: 1) accelerates privatization process by curbing the underpricing transfers to state entities and encouraging the normal transfers to private entities or individuals; and 2) by reducing managers' incentives to maintain the dominance of state ownership for expropriation through the discretion of perk consumption. Moreover, our findings are particularly pronounced for SOEs located in areas with high levels of social trust, government intervention, and less information asymmetry.

Does business strategy of the state‐owned enterprise affect the participation of non‐state‐owned capital?: Empirical evidence from China

“…At the same time, SOEs with aggressive strategy types tend to have higher market value, which can enhance the willingness of non‐private firms to participate. This study enriches the existing literature in the field of related research by examining the dual dimensions of SOE reform drivers and NSOEs' entry intentions (Zhu & Kong, 2023). Third, this study further finds that the impact of business strategy on private capital participation in SOE reform is more significant in commercially competitive industries and in contexts with a better business environment.…”

“…Referring to Zhu and Kong (2023), the paper controls for firm characteristic variables including firm size ( SIZE ), capital structure ( LEV ), enterprise growth ( GROWTH ), asset return on investment ( ROA ), and company age ( AGE ), as well as controlling for corporate governance variables including board size ( BOARD ), duality ( DUAL ), and the proportion of independent directors ( INDEP ). In addition, the paper also controls for year ( YEAR ) and industry ( IND ) fixed effects.…”

“…Secondly, this paper carefully identifies the mechanism of the influence of business strategy on the participation of private capital, and our research expands the research perspective of strategic management theory. Different from existing literature that examines the influencing factors of mixed ownership reform from a single perspective (Postuła & Wąsowska, 2018; Zhu & Kong, 2023), this paper conducts research from the dual dimensions of SOE reform motivation and non‐state‐owned enterprises' (NSOEs) entry intention, making up for the shortcomings of the research perspective in the existing relevant research field. Thirdly, this study introduces microlevel types of business strategies and macro‐level regional business environment into the research framework of SOE reform, which expands the boundary conditions of the impact of business strategies on SOE reform.…”

“…Some scholars argue that the conflicting interests of different ownership natures weaken the incentives for SOE reform, while inefficient management models in SOEs hinder their participation in market‐oriented competition (Firth et al, 2006; Lin, 2021; Qian, 1996). Prior study has conducted relatively insufficient research on the factors influencing mixed ownership reform, and research perspectives are limited to policy environment, government behavior, and managerial discretion (Postuła & Wąsowska, 2018; Zhu & Kong, 2023). Moreover, research perspectives are mostly based on the willingness of the government to delegate power or the willingness of non‐state‐owned capital to participate.…”

“…Scholars have mostly focused on the impact of mixed ownership reforms on the production and operation of enterprises (Li et al, 2022, 2023; Wang et al, 2021). Relevant studies on the factors influencing mixed ownership reforms have also focused on aspects such as the macro‐policy environment (Zhu & Kong, 2023) and management rights (Postuła & Wąsowska, 2018). This study takes business strategy as an entry point to explore in depth the positive impact of the type of corporate strategy on the participation of private capital in the reform of SOEs, responding to the call for the importance of corporate business strategy in the field of corporate governance (Bentley et al, 2013; Bentley‐Goode et al, 2019; Bharadwaj et al, 2013; Casadesus‐Masanell & Zhu, 2013; Higgins et al, 2014; Teece, 2018), and has important reference significance for economic system reform in developing countries.…”