This study compares pre- and post-listing financial and operating performance for a complete sample of H-firms that are incorporated in Mainland China and listed in Hong Kong between 1993 and 2000. Theoretically, there are two major opposing influences on the performance change of these newly listed firms: negative initial public offering (IPO) effect and positive privatization effect. Our major findings are: (1) the IPO effect dominates the privatization effect, so that the H-firms experienced a significant decrease in profitability and operating efficiency after listing, and (2) the performance of a control sample of newly listed private firms declined more than that of the H-firms, probably because the positive privatization effect somewhat offset the negative IPO effect for the H-firms. This paper is the first to document the positive effect of privatization in oversea listed Chinese companies.
- Hong Kong stock market
- Share issue privatization (SIP)
- State-owned enterprises (SOEs)