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Ownership Structure as a Determinant of Firm Value: Evidence from Newly Privatized Czech Firms

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  • Makhija, Anil K
  • Spiro, Michael
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    Abstract

    Using a sample of 988 newly privatized Czech firms, with part of the ownership structure exogenously determined prior to voucher privatization, we find that share values are positively related with the ownership stakes of foreigners, insiders, and restituents. While the findings for foreigners and insiders can be attributed to their superior ability to identify more profitable firms, we interpret the findings on restituents as evidence of the beneficial effect of blockholdings. On the other hand, we find that the ownership of the fund with the largest stake is not significantly related with share value, suggesting that the value of external blocks depends on the identity of the owner. However, when the fund is also the largest blockholder in the firm, it has an adverse effect on share value. The negative effect of the dominant block owned by a fund is mitigated when a bank sponsors the fund. Although funds are legally separated from their sponsoring institutions, bank-sponsored funds may nevertheless have inherited a better access to the innards of these firms, and may be in a better position to monitor them. Copyright 2000 by MIT Press.

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    Bibliographic Info

    Article provided by Eastern Finance Association in its journal The Financial Review.

    Volume (Year): 35 (2000)
    Issue (Month): 3 (August)
    Pages: 1-31

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    Handle: RePEc:bla:finrev:v:35:y:2000:i:3:p:1-31

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    Web page: http://www.easternfinance.org/
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    Cited by:
    1. Stringham, Edward & Boettke, Peter & Clark, J.R., 2008. "Are regulations the answer for emerging stock markets? Evidence from the Czech Republic and Poland," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(3), pages 541-566, August.
    2. Ondrej Vychodil, 2005. "Ownership Concentration and Restructuring in Czech Manufacturing Sector," Finance 0511004, EconWPA.
    3. Peter Toth & Petr Zemcik, 2006. "What Makes Firms in Emerging Markets Attractive to Foreign Investors? Micro-evidence from the Czech Republic," CERGE-EI Working Papers wp294, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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