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China's privatization reform

Bengtsson, Anna (2006)
Department of Economics
Abstract
This thesis evaluates twelve Chinese companies participating in a privatization reform initiated by the government. The companies were chosen for the reform during spring/summer of 2005, and the participation in the reform means that the companies start selling off state-owned shares and transform them into publicly traded A-shares. In China, A-shares are shares held by domestic investors and denominated in Chinese currency, RMB. This case study shows how share value changes for the twelve companies when they sell off their previously non tradable, state-owned shares. The reform of 2005 was divided into two parts, firstly there were four companies and out of these two were picked. Secondly, there were 42 companies and out of these ten were... (More)
This thesis evaluates twelve Chinese companies participating in a privatization reform initiated by the government. The companies were chosen for the reform during spring/summer of 2005, and the participation in the reform means that the companies start selling off state-owned shares and transform them into publicly traded A-shares. In China, A-shares are shares held by domestic investors and denominated in Chinese currency, RMB. This case study shows how share value changes for the twelve companies when they sell off their previously non tradable, state-owned shares. The reform of 2005 was divided into two parts, firstly there were four companies and out of these two were picked. Secondly, there were 42 companies and out of these ten were picked. The results show that share value does change when the company decides to participate in the reform, and ten out of twelve companies show decreasing share value after participating in the reform. However, share value is expected to drop since the market suddenly contains more shares, and because of this there are compensation plans involved. Holders of non tradable share are to compensate holders of tradable shares in different way, most commonly by giving them between one and four shares for every ten shares they own. Even so, there is a drop in share value and this probably has to do with the market not really believing in privatization just yet and the fact that there are issues and problems to work out regarding the transformation of ownership; for example the transfer of property rights to the new shareholders, and the transformation from a soft to a hard budget constraint. (Less)
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@misc{1335911,
  abstract     = {This thesis evaluates twelve Chinese companies participating in a privatization reform initiated by the government. The companies were chosen for the reform during spring/summer of 2005, and the participation in the reform means that the companies start selling off state-owned shares and transform them into publicly traded A-shares. In China, A-shares are shares held by domestic investors and denominated in Chinese currency, RMB. This case study shows how share value changes for the twelve companies when they sell off their previously non tradable, state-owned shares. The reform of 2005 was divided into two parts, firstly there were four companies and out of these two were picked. Secondly, there were 42 companies and out of these ten were picked. The results show that share value does change when the company decides to participate in the reform, and ten out of twelve companies show decreasing share value after participating in the reform. However, share value is expected to drop since the market suddenly contains more shares, and because of this there are compensation plans involved. Holders of non tradable share are to compensate holders of tradable shares in different way, most commonly by giving them between one and four shares for every ten shares they own. Even so, there is a drop in share value and this probably has to do with the market not really believing in privatization just yet and the fact that there are issues and problems to work out regarding the transformation of ownership; for example the transfer of property rights to the new shareholders, and the transformation from a soft to a hard budget constraint.},
  author       = {Bengtsson, Anna},
  keyword      = {property rights,China,state-owned shares,privatization,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {China's privatization reform},
  year         = {2006},
}