ABSTRACT
Privatization is at the top of the political agenda in Asia. In China, the state sector has failed to wither and continues to consume a large amount of state resources. This chapter focuses on one important issue that has emerged over the past decade: corporate governance of privatized firms. It also focuses on this literature, emphasizing points that seem particularly relevant for thinking about privatization. The chapter reviews evidence showing that effective laws are an important requirement for corporate governance. Without enforceable investor protection, privatization is less likely to succeed. Even among the scholars who are convinced that legal rules matter, there is Coasian skepticism about whether changing rules can have large effects. Other domestic institutions can adapt to some extent but not enough to offset weak legal protection. The government has only limited ability to act directly to compensate for weak investor protection. Laws and other institutions providing investor protection are persistent and hard to change.
