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Market liberalization and firm performance during China's economic transition

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Abstract

This paper examines the impact of market liberalization on firm performance through institutional changes during the economic reform in China. The conceptualization focuses on the decentralization of control, ownership restructuring, and industrial policy as the primary institutional changes to implement market liberalization in China. These institutional changes affect firm performance by shaping managerial incentives, affecting transaction and agency costs, and making selective resource allocations across and within industries. Using a large-scale data set including 23,577 firms between 1992 and 1996, the study examines how market liberalization affects the profitability and productivity of Chinese firms and the relationship between ownership change and the performance of state-owned enterprises.

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Acknowledgements

We are grateful for helpful comments from Mike Gordon, Yadong Luo, Scott Gallagher, Dong Chen, and especially Arie Y Lewin.

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Authors and Affiliations

  1. Samsung Economic Research Institute/CEIBS, Chao Yang District, Beijing, People's Republic of China

    Seung Ho Park

  2. Department of Business Administration, Old Dominion University, Norfolk, Virginia, USA

    Shaomin Li

  3. School of Business, University of Hong Kong, Hong Kong

    David K Tse

Authors
  1. Seung Ho Park
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  2. Shaomin Li
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  3. David K Tse
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Correspondence to Seung Ho Park.

Additional information

Accepted by Arie Y Lewin, Editor-in-Chief, 30 May 2005. This paper has been with the author for two revisions.

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Park, S., Li, S. & Tse, D. Market liberalization and firm performance during China's economic transition. J Int Bus Stud 37, 127–147 (2006). https://doi.org/10.1057/palgrave.jibs.8400178

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  • DOI: https://doi.org/10.1057/palgrave.jibs.8400178

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