Chapter 6: Market Efficiency in a Chinese Context
6. Market eﬃciency in a Chinese context I INTRODUCTION Ever since the birth of the H-share market in 1993, as each new batch of SOEs and, later, each individual enterprise, has been approved for listing on the HKEx, policy makers have hoped that corporatization will promote the depoliticization of ﬁrm management and personnel relationships, while at the same time increasing the eﬃciency of asset use, boosting ﬁrm proﬁt levels and ultimately increasing revenue from the ﬁrm to the state. The underlying premise has been that even partial privatization will improve SOEs’ performance, not so much by eliminating monopolistic government ownership per se, but rather because it removes such ﬁrms from an environment where the number of government bodies claiming ownership privileges is far too many and the actual ﬁnancial stakes linking those bodies to the ﬁrm far too few. As Steinfeld explains, ‘According to this logic, once policy makers provide a clear and decisive answer to the question of who owns, enterprise performance will . . . improve.’1 The theory is that corporatization, by designating shares in the ﬁrm and then dividing up those shares amongst a contained group of holders, creates clearly-deﬁned and identiﬁable owners who have a true interest in maximizing eﬃciency and ﬁrm proﬁtability. The Hong Kong Stock Exchange is perceived by most as having an eﬀective pre- and post-IPO corporate governance system with higher standards than the domestic mainland stock exchanges. According to a recent IIF Equity Advisory Group Task Force...
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