Title: The Costs and Benefits of Government Ownership: Evidence from Privatization of China's Collectively-Owned Enterprises
Reference Number: 1171
Publication Date: June 2007
JEL Classifcation: L33, P31, D23
Author(s):

Jiangyong Lu
Tsinghua University

Zhigang Tao
The University of Hong Kong

Zhi Yang
The University of Hong Kong

Abstract:

The rise and decline of China's collectively-owned enterprises, a hybrid of public and private ownership, has led to intensive debates about the costs and benefits of government ownership. It has been argued that government ownership may help firms gain access to production inputs and infrastructural services, but government officials may use public enterprises to pursue private benefits. From a panel dataset of 13,733 China's collectively-owned enterprises for the period of 1998-2003, it is found that collectively-owned enterprises, once privatized, encountered an increase in the cost of goods sold to sales ratio but had a decrease in the managerial expenses to sales ratio. These changes in the costs and benefits of government ownership are found to be most significant in the first privatization and take place immediately after the privatization.

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Key words: collectively-owned enterprises, costs and benefits of government ownership, managerial expenses, and cost of goods sold

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Last modified: 07/06/2007