This study compares, with the use of accounting data, the pre- and postlisting financial and operating performance for the complete sample of the H-firms that were incorporated in mainland China and listed in Hong Kong. Theoretically, there are two major opposing influences on the performance change of these newly listed firms: the negative IPO effect and the positive privatization effect. Our major findings are: (1) the IPO effect dominates the privatization effect, so that the H-firms experienced a significant decrease in profitability and operating efficiency after listing, and (2) the performance of a control sample of newly listed private firms declined more than that of the H-firms, probably because the positive privatization effect somewhat offset the negative IPO effect for the H-firms. This paper is the first to document the positive effect of revenue privatization in listed Chinese companies.
Key words: Company performance, share issue privatization (SIP), state-owned enterprises (SOEs), IPO, China, reform, Hong Kong capital market