Dissertation Defenses

Doctoral Dissertation Announcement

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Candidate: Song Gao

Degree of: Doctor of Philosophy

Department: Economics

Title: A Study of the Productivity Effects of Enterprise Reforms in China

Committee:
Dr. Wei-Chiao Huang, Chairj
Dr. Donald Alexander
Dr. John Earle
Dr. Huizhong Zhou

Date: Monday, July 26, 2010 2:00 p.m. - 4:00 p.m.
5302 Friedmann Hall

Abstract:
This research studies the progress and impacts of State-Owned Enterprises (SOEs) privatization in China. The primary interests center on impacts of privatization on Chinese SOEs’ efficiency. The research is comprised of three sections.
Section one briefly reviews the history of SOEs’ reform in China and examines the changes of some selected performance indicators with the help of a comprehensive dataset on 863 Chinese firms from 1995 to 2001. In addition, causes of Chinese SOEs’ privatization and determinants of firms’ inefficiency are also studied.
Section two examines the effects of privatization and non-ownership-change reforms on firms’ productivity in China. As one of the most prominent empirical challenges in China privatization studies, endogeneity problems are addressed with a first-difference instrumental variable GMM estimation. The estimation results show that privatization does not improve firms’ productivity immediately. Instead, its effects become significantly positive in the year after conversion. In addition, partial privatization fails to lead to improved efficiency whereas insider privatization boosts firms’ productivity shortly after the first year of privatization but the effects quickly fade after two years of privatization. Lastly, all non-ownership-change reforms, except leasing, are proved to be ineffective even when issues like social burdens, worker redundancy, management incentives and soft-budget constraint are tackled before the restructuring.
To shed light on impacts of privatization on firms’ technical efficiency, section three proposes a two-step stochastic frontier model. The first step addresses the endogeneity issue by estimating the probability of privatization with a random effects probit model. The second step estimation investigates the causes of Chinese manufacturing’s inefficiency with a random-effects stochastic frontier model. The estimation results suggest that privatization, hardening budget constraint and reducing firms’ social obligations have significantly contributed to the improvements of firms’ efficiency. However, no evidence is found that more autonomy for managers and lower debt asset ratio may help improve firms’ efficiency.