The impact of residual government ownership in privatized firms: New evidence from China

This study investigates the determinants of residual government ownership and the impact of such ownership on post-privatization performance in China. Using hand collected data, we find that government shareholders are more likely to be present in small firms, while large firms are more likely to have politically connected CEOs on their boards. Contrary to the "political interference" hypothesis, our results show that residual government ownership has a positive impact on Tobin's Q. This study indicates that when the risk of expropriation by parent companies is high, government shareholders can add value to firms by signalling their commitment to privatization. (C) 2012 Elsevier B.V. All rights reserved.