A Study On The Consequences Of Soes Privatization From Perspective Of Corporate Investment Efficiency

The government-led reform of the state-owned enterprises(SOEs)has been the core of China's economic reform over the past 40 years.A large number of scholars have examined the effect of China's SOEs privatization,they mainly analyze the efficiency difference between SOEs and private firms from the aspects of principal-agent theory,market competition theory,transaction cost theory and social responsibility.It is generally believed that privatization can improve the SOEs' efficiency by reducing agency costs,strengthening the incentive and supervision mechanisms.However,these studies have neglected another important question: whether the privatization reform of SOEs is thorough,and whether SOEs can compete with other types of firms in the market after privatization.Therefore,a comprehensive study of the effect of SOEs privatization will help us to make an objective evaluation of the current privatization efficiency,and provide an important theoretical basis for how to improve the efficiency of privatized enterprises.Based on the perspective of corporate investment efficiency,this study examines the effects of privatization from two aspects.Firstly,by constructing the panel data of SOEs and privatized firms,it tests whether privatization can improve SOEs' investment efficiency.On this basis,this study analyzes and tests the ways in which privatization affects SOEs' investment efficiency by examining the role of political view and managerial view on corporate investment efficiency and the changes of political view and managerial view in the privatization process.Secondly,by constructing the panel data of privatized firms and private firms,the study investigates the difference of investment efficiency and governance structure between the privatized firms and the competitive private firms in the market,and analyzes how executives with government background will hinder the effective operation of corporate governance mechanisms and distort corporate investment decisions.This study examines the above contents by using a sample of Chinese non-financial listed firms during the period 2003-2016.The main findings are as follows:Firstly,privatization has a significant impact on corporate investment efficiency.By employing the sensitivity of investment to investment opportunities(Tobin's Q)as the measure of investment efficiency,the study finds that privatization can significantly improve firms' investment efficiency.Further test finds that the investment efficiency of SOEs is significantly negatively correlated with policy burdens such as redundancy and high wages,while privatization can significantly reduce firms' wages and employee ratios.Secondly,the government background of executive has a significant impact on privatized firms' investment efficiency.This study finds that the investment efficiency of privatized firms is significantly lower than the private firms.Heterogeneity analysis shows that only the privatized firms with government background executives have lower investment efficiency than the private firms;the difference in investment efficiency between the privatized firms and the private firms is only significant in areas with low competition.In addition,this study finds that the proportion of government background executives in the privatized firms is twice that of the private firms.Thirdly,executive compensation incentive significantly affects the investment efficiency of the privatized firms.This study finds that the executive compensationperformance sensitivity of privatized firms is significantly lower than the private firms.Further test finds that the difference of compensation-performance sensitivity between the executives with and without government background is only significant in the privatized firms;the higher the regional market competition,the smaller the difference between the executive compensation-performance sensitivity of the privatized firms and the private firms.The study also finds that excess executive compensation has a significant negative impact on corporate investment efficiency in the privatized firms and the private firms.