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Ownership and Firm Performance after Large-Scale Privatization

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  • Evzen Kocenda
  • Jan Svejnar

Abstract

We analyze the effect of ownership on post-privatization performance in a virtually complete population of medium and large firms privatized in a model large-scale privatization economy (Czech Republic). We find that concentrated foreign ownership improves economic performance, but domestic private ownership does not, relative to state ownership. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labor cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and evidence against theories stressing the positive effects of managerial autonomy and initiative. We find support for a version of the hypothesis that firms restructure by first lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring while pursuing an employment objective, which is understandable in a period of rising unemployment. Our results hence portray the state as a more economically and socially beneficial agent than do some other recent studies.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp209.

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Date of creation: May 2003
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Handle: RePEc:cer:papers:wp209

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Keywords: ownership; performance; privatization; panel data; industrial organization;

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Citations

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Cited by:
  1. Nivorozhkin, Eugene, 2004. "Financing choices of firms in EU accession countries," BOFIT Discussion Papers 6/2004, Bank of Finland, Institute for Economies in Transition.
  2. Nivorozhkin, Eugene, 2005. "Financing choices of firms in EU accession countries," Emerging Markets Review, Elsevier, vol. 6(2), pages 138-169, June.
  3. Nivorozhkin, Eugene, 2004. "Financing Choices of Firms in EU Accession Countries," Ratio Working Papers 33, The Ratio Institute.
  4. Jana P. Fidrmuc, 2006. "Channels of Restructuring in Privatized Czech Companies," Working Papers wpn06-18, Warwick Business School, Finance Group.
  5. Irena Grosfeld & Iraj Hashi, 2004. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," William Davidson Institute Working Papers Series 2004-718, William Davidson Institute at the University of Michigan.
  6. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2002. "The Effects of Privatization and Competitive Pressure on Firms?Price-cost Margins: Micro Evidence from Emerging Economies," LICOS Discussion Papers 12502, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  7. Anjali Kumar & Manuela Francisco, 2005. "Enterprise Size, Financing Patterns, and Credit Constraints in Brazil : Analysis of Data from the Investment Climate Assessment Survey," World Bank Publications, The World Bank, number 7330, August.
  8. Uppenberg, Kristian & Riess, Armin, 2004. "Determinants and growth effects of foreign direct investment," EIB Papers 3/2004, European Investment Bank, Economics Department.
  9. repec:hal:wpaper:halshs-00590865 is not listed on IDEAS
  10. Bilgehan Karabay & Gernot Pulverer & Ewa Weinmüller, 2009. "Foreign Ownership Restrictions: A Numerical Approach," Computational Economics, Society for Computational Economics, vol. 33(4), pages 361-388, May.
  11. Catarina Figueira & Joseph Nellis & David Parker, 2009. "The effects of ownership on bank efficiency in Latin America," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2353-2368.

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