Profiting from gaizhi: Management buyouts during China's privatization

► We examined the performance of firms acquired by their managers under Gaizhi in China. ► We performed a non-parametric Mahalanois matching method. ► Firms privatized by insiders experienced a significant decrease in profitability prior to privatization. ► Accompanied by a decrease in labor productivity, an increase in overdue receivable, and an increase in R&D investment. ► We do not observe a similar pattern among firms acquired by outsiders.