Comprehensive evaluation and identification of the critical regulatory determinants of carbon emission efficiency (CEE) are very important for China’s low-carbon transition. Accordingly, this paper first employs an undesirable global super-hybrid measure approach to calculate the CEE of China’s iron and steel industry (ISI). We then further use spatial error and threshold regression models to examine the spatial and non-linear effects of heterogeneous environmental regulations on CEE, respectively. Our empirical results show that (1) CEE varies significantly across China’s regions, with the eastern region having the highest CEE score, followed by the western and central regions, with the northeast region ranking the lowest; (2) command-and-control and market-incentive regulations both promote CEE, whereas the public participation approach does not significantly contribute to performance gains; (3) all three types of environmental regulations exhibit a non-linear threshold effect on CEE; (4) openness level, technological progress, and industrial concentration enhance efficiency gains, while urbanization level exerts a negative impact on CEE. Our findings have important implications for the design of environmental regulations.

We investigate the choice problem in the massive Chinese restructuring campaign that has been described as “grasping the large and letting go of the small,” in which a third of the million or so Chinese state-owned enterprises were either corporatized or privatized. Corporatization differs from privatization in the Chinese context, as in the former case the state remains a large shareholder, whereas in the latter case it has little or no ownership. Using a panel of provincial level statistics, we show that greater local employment pressure, less local fiscal pressure, and a more corrupt local business environment all lead to a lesser likelihood that privatization will be chosen over corporatization. Privatization is found to yield consistent efficiency gains over corporatization in terms of employment and firm profitability. Our evidence is supportive of the theoretical framework of Boycko, Shleifer, and Vishny (1996), who model privatization as an endogenous decision in which politicians trade off employment pressure against public fiscal interest.

A fundamental question in finance is whether and how removing market frictions is associated with efficiency gains. We study this question using share issue privatization in China that took place through the split share structure reform. Prior to the reform, domestic A-shares were divided into tradable and non-tradable shares with identical cash flow and voting rights. Under the reform, holders of the non-tradable shares negotiated a compensation plan with holders of the tradable shares in order to make their shares tradable. We hypothesize that efficiency gains in terms of better risk sharing play an important role in the determination of compensation. We show that the size of compensation is positively associated with both the gain in risk sharing and the price impact of more shares coming to the market after the reform, and is negatively associated with the bargaining power of holders of non-tradable shares and firm performance. Our study highlights the role of risk sharing in China’s share issue privatization.

This paper tests the relation between large shareholders and firm value using a recent reform in China’s equity market. The reform eliminated the discrepancy between large shareholders’ voting rights and cash-flow rights. The paper finds that large shareholders expropriate less through related party transactions after the reform when the discrepancy between their voting rights and cash-flow rights prior to the reform was larger. It also finds that minority shareholders gain from the reform: firms earn higher excess returns around the reform announcements when the discrepancy was larger. Finally, it provides the evidence of efficiency gains associated with the reform. The paper concludes that the discrepancy between large shareholders’ voting rights and cash-flow rights can lead to efficiency losses.

We investigate the endogenous choice problem of Chinese state-owned enterprises in their decision on whether to corporatize or privatize. Corporatization differs from privatization in the Chinese context, as in the former case, the state remains as a large shareholder, and in the latter case, the state has little or no ownership. Using a panel of provincial statistics, we show that the larger the local employment pressure, the less likely we see privatization; the smaller the local fiscal pressure, the less likely we see privatization; the more corrupted the local business environment, the less likely we see privatization. Privatization is found to yield consistent efficiency gains over corporatization measured in terms of both employment and firm profitability. Our evidences are supportive of the theoretical framework of Boycko and Shleifer and Vishny (1996) where they model privatization as politicians’ endogenous decision trading off employment pressure against public fiscal interest.

A fundamental question in economics and finance is whether and how removing barriers is associated with efficiency gains. We study this question using share issue privatization in China that took place through the split share structure reform as our experimental setting. Prior to the reform, domestic Ashares are divided into tradable and non-tradable shares with identical cash flow and voting rights. Under the reform, non-tradable share holders negotiate a compensation plan with tradable share holders in order to make their shares tradable. We develop a general equilibrium model to help understand the determinants of compensation and the source of gains in the process of privatization. Our key predictions are: a) there is compensation made by the non-tradable share holders to the tradable share holders if and only if the bargaining power of the former is weaker than the bargaining power of the latter; and b) the size of the compensation is decreasing in firm performance. Our second prediction contradicts conventional wisdom that fails to account for improved risk sharing after the reform. Our empirical results are broadly consistent with our model’s predictions. We conclude that better risk sharing is an important consideration in China’s share issue privatization.