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Post-privatization corporate governance and firm performance: The role of private ownership concentration, identity and board composition

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  • Omran, Mohammed
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    Abstract

    We examine and analyze the post-privatization corporate governance of a sample of 52 newly privatized Egyptian firms over a period of 10Â years, from 1995 to 2005. We look at the ownership structure that results from privatization and its evolution; the determinants of private ownership concentration; and the impact of private ownership concentration, identity and board composition on firm performance. We find that the state gives up control over time to the private sector, but still controls, on average, more than 35% of these firms. We also document a trend in private ownership concentration over time, mostly to the benefit of foreign investors. Firm size, sales growth, industry affiliation, and timing and method of privatization seem to play a key role in determining private ownership concentration. Ownership concentration and ownership identity, in particular foreign investors, prove to have a positive impact on firm performance, while employee ownership concentration has a negative one. The higher proportion of outside directors and the change in the board composition following privatization have a positive effect on firm performance. These results could have some important policy implications where private ownership by foreign investors seems to add more value to firms, while selling state-owned enterprises (SOEs) to employees is not recommended. Also, the state is highly advised to relinquish control and allow for changes in the board of directors following privatization as changing ownership, per se, might not have a positive impact on firm performance unless it is coupled with a new management style.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Comparative Economics.

    Volume (Year): 37 (2009)
    Issue (Month): 4 (December)
    Pages: 658-673

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    Handle: RePEc:eee:jcecon:v:37:y:2009:i:4:p:658-673

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    Web page: http://www.elsevier.com/locate/inca/622864

    Related research

    Keywords: Privatization Ownership concentration Corporate governance Egypt;

    References

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    Cited by:
    1. Izak Atiyas, 2011. "Firm-Level Data In The Mena Region: Research Questions, Data Requirements And Possibilities," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 159-190.
    2. Mouna Mrad & Slaheddine Hallara, 2014. "The Relationship Between the Board of Directors and the Performance/Value Creation in a Context of Privatization: The Case of French Companies," Public Organization Review, Springer, vol. 14(1), pages 83-108, March.
    3. Cabeza-García, Laura & Gómez-Ansón, Silvia, 2011. "Post-privatisation ownership concentration: Determinants and influence on firm efficiency," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 412-430, September.
    4. repec:hur:ijaraf:v:4:y:2014:i:2:p:98-108 is not listed on IDEAS
    5. Rim Ben Hassen & Omri Abdelwahed, 2014. "Privatization of Tunisian Companies: A Study of Corporate Governance Mechanisms," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 94-104, April.

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