We examine changes in market values and accounting returns for a sample of publicly traded Chinese firms around announcements of block-share transfers among government agencies (“State Bureaucrats”), market-oriented State-owned enterprises (“MOSOEs”) and private investors (“Private Entities”). We provide evidence that transfers from State Bureaucrats to Private Entities result in larger increases in market value and accounting returns than transfers to MOSOEs. We also find that CEO turnover occurs more quickly when shares are transferred to Private Entities. Moreover, we find that the changes in firm value and accounting returns as well as the likelihood of CEO turnover are all functions of the incentives and managerial expertise of the new block holder. We conclude that corporate governance can be improved at State-controlled firms by improving the incentives and managerial expertise of controlling block holders, and that this is better accomplished by transferring ownership to private investors rather than by shuffling ownership among State controlled entities.

Using a sample of China’s partially privatized state-owned enterprises (SOEs) that have emerged in the global equity markets, this paper examines the decision to list overseas and its consequences. We find that overseas listing of Chinese SOEs is primarily determined by political needs, not by firms’ desire to fund growth and expand foreign sales. In addition, we find that overseas listed SOEs have more professional boards of directors, use greater accounting conservatism, exhibit higher investment efficiency, and have better one-year and two-year post-listing stock performance than their domestically listed counterparts. Additional analysis exploring the impact of political relations on overseas listing effects finds that strong political connections weaken the overseas listing effect on investment efficiency and post-listing stock performance, consistent with the positive overseas listing effect on investment efficiency being attenuated by government influence to satisfy state objectives such as excess employment. Taken together, our study suggests that overseas listing provides a mechanism for constraining politicians’ pursuit of private benefits and improving efficiency for partially privatized Chinese SOEs. However, the effectiveness of this mechanism is limited for SOEs with strong ties to the government.