Abstract: This article is about corporate governance and its impact on the long-term performance of recently privatized state-owned enterprises (SOEs) in China. In this article, the pre- and post-initial public offering (IPO) performance of three Chinese oil companies are benchmarked against oil companies in other emerging markets. In the case of China, short-term improvements were made possible by aligning management incentives with operating performance. However, such improvements were not sustainable over a longer period due to the fact that the capital allocation process had remained aligned with government objectives. In the author's view, long-term efficiency improvement can only be achieved and sustained through privatization, i.e., a radical change of ownership control that aligns investment decisions with long-term objectives for both operating efficiency and growth performance
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