Ultimate Control Rights, Nationalization and Firm Performance: Evidence from China

This study extends the empirical literature on nationalization by examining the determinants and consequences of state takeovers among China listed firms in which ultimate control has been transferred from private owners to the government. This study finds that state takeovers are more likely in firms with poor performance and higher leverage. Moreover, privatization of central state-owned enterprises is most likely to be reversed. Contrary to popular belief about government interventions, state takeovers lead to higher profitability and labor productivity. These results suggest that government takeovers could address market failures and enhances firms' performance in emerging markets.