Corruption in Chinese Privatizations

fisman, raymond ; wang,yongxiang;

We document evidence of corruption in Chinese state asset sales. These sales
involved stakes in partially privatized firms, providing a benchmark�the price of
publicly traded shares�to measure underpricing. Underpricing is correlated
with deal attributes associated with misgovernance and corruption. Sales by
�disguised� owners that misrepresent their state ownership to elude regulatory
scrutiny are discounted 5�7 percentage points more than sales by other owners;
related party transactions are similarly discounted. Analysis of subsequent
operating performance provides suggestive evidence that aggregate ownership
transfers improve profitability, though not in cases where the transfers
themselves were corrupted