The European System Of State-owned Holding Company Gold Stocks

There is a common feature of privatizations during the privatization wave of the1970s and1980s in Europe that is the retention of special rights by public authorities in the privatized companies. Special rights, also referred to as’golden share’preserve the influence of governments over the companies they privatized and grant the governments powers that are otherwise only available to a majority shareholder.After the review of the four board areas of academic literature, this paper introduces the practices of special rights in Europe, especially for the16privatized companies. The detailed case study of4companies was used to evaluating the impact of golden share on company long-term performances. The event study analysis method was also used around the abolition of golden share held by the UK government in privatized companies in the water and electricity sectors to assessing the impact of golden share on the share price and the takeover activities. Then analysis the case in China, compares the differences between China and Europe, concluded the characters of golden share practice in China. The overall results of the impact of golden share are following:(1)Impact on investment and shareholders. The special rights in Europe almost in all privatized companies restrict investment directly specially for foreign investors. The restrictions deter a bidder from takeover the company, and then the shareholders are deprived of an opportunity to dispose of their investment in the company and the premiums from the takeover. The conclusion from the event study analysis is that golden share has adverse impact on the share price as well as for the shareholders.(2)Impact on company performance. Any reduced fear of hostile takeover would result in managerial slack and deterioration in economic performance. Through the comparisons on history performance of the company and benchmarking company’s performance, evidence can concluded that golden share has negative impact on the company performance. Besides this, the event study analysis supports the evidence that the abolition of golden share can bring the raise of the share price and accelerate the takeover activities. All these verify that golden share has negative impact on the performance indirectly.(3)Impact on market integration. Special rights distort market-drive investment activity, preventing firms from realizing economics of scales and synergies, impeded the efficient allocation of capitals.Although special rights have so much negative impact for the company, some may argued that the measures are justified in certain circumstances. Governments may deem it necessary to impose golden share following privatization, given concerns about a divergence between public policy objectives and the private goals of unconstrained private companies, particular to companies providing public services. And these special companies are the place where there may be concern about security of supply, universal access to a service and distributional implications of pricing policy.Besides the evaluation for golden share impact on the long and short term performance of companies, this paper study the golden share cases in China. There are few cases all over China, only for6. From the limit cases, we can conclude the characters of china enterprises" golden share comprising to the Europe. The main features focus on two points:one is that the companies remain golden share are mostly in local state-owned level. And the case companies are running in the red. The local government just wants to sale this burden. The cases of the company in little scale and have not important impact for the reform of China SOEs. All these suggest that the practice of golden share in our country is at the beginning stage at present. Another is that every case of golden share in China had its distinctive characteristics, cases have no common grounds. And the targets for golden share are different in the cases, they lay stress on solving the specific problems the company confronted, such as the Personnel placement and Elimination of private capital to enter. Thus, the cases of golden share have distinct Chinese characteristics.The innovation of the paper:First, use the case study and event analysis methods to assess the impact of golden share on the long-term performance of the companies. And an event study analysis around the abolition of golden share in the UK electricity and water sectors. The research of golden share in China is very rarely for empirical analysis; this paper in some extents assessed the value or the cost of golden share,and filled the blank of the relevant research in China. Secondly, this paper uncovered the potential for the practice of golden share. The cases of golden share in China are not being seen as important as it should be. The paper realized the value of these cases and assessed the possible influence from different views. Forecasted the demonstration effect of he limited case, this may be very important for China’s state-owned enterprises reform.