This study examines the role of Chinese state ownership in deterring takeovers. We
document state ownership's reduction in firms' susceptibility to potential takeovers. Using
staggered privatization of the state-owned shareholders of public firms, as shocks to the
deterrent effect of the state, we find that state-owned shareholders can insulate their portfolio
firms from potential takeovers. The deterrent effect of state ownership is concentrated in
strategic industries and well-functioning assets, alleviating managerial short-termism.