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Origin and Concentration: Corporate Ownership, Control and Performance

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  • Jan Hanousek
  • Evzen Kocenda
  • Jan Svejnar

Abstract

We analyze the effects of different types and concentration of ownership on performance using a population of firms in a model transition economy after mass privatization. Specifications based on first-differences and unusual instrumental variables show that contrary to conventional wisdom, the effects of privatization and different types of ownership are limited and many types of private owners do not generate performance that is different from that of firms with state ownership. Concentrated ownership has a positive effect but only in some instances and a positive effect of foreign ownership is detectable primarily for majority ownership and foreign industrial firms. The effects of concentrated ownership support the agency theory and go against theories stressing the positive effects of managerial autonomy. Our results are also consistent with managers or stockholders “looting” the firms. The state as a holder of the golden share has a positive effect on employment and in some specifications also on output and profitability. Overall, our results suggest that the expectations and earlier findings of positive effects of privatization on performance were premature, with the effects of many types of ownership being indistinguishable from that of state ownership.

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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 wp259.

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Date of creation: May 2005
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Handle: RePEc:cer:papers:wp259

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Keywords: Ownership; performance; privatization; corporate governance; panel data; endogeneity; industrial.;

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References

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  1. Gérard Roland, 2000. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262182033, December.
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  7. Evžen Kočenda, 1999. "Residual State Property in the Czech Republic," Eastern European Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 37(5), pages 6-35, October.
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  10. Münich, Daniel & Svejnar, Jan & Terrell, Katherine, 1999. "Returns to Human Capital Under the Communist Wage Grid and During the Transition to a Market Economy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2332, C.E.P.R. Discussion Papers.
  11. Grosfeld, Irena & Roland, Gérard, 1995. "Defensive and Strategic Restructuring in Central European Enterprises," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1135, C.E.P.R. Discussion Papers.
  12. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 1-25, January.
  13. Jan Svejnar & Miroslav Singer, 1994. "Using vouchers to privatize an economy: the Czech and Slovak case," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 2(1), pages 43-69, 03.
  14. Smith, Stephen C. & Cin, Beom-Cheol & Vodopivec, Milan, 1997. "Privatization Incidence, Ownership Forms, and Firm Performance: Evidence from Slovenia," Journal of Comparative Economics, Elsevier, vol. 25(2), pages 158-179, October.
  15. Wendy Carlin & Steven Fries & Mark Schaffer & Paul Seabright, 2001. "Competition and Enterprise Performance in Transition Economies from a Cross-Country Survey," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 0101, Centre for Economic Reform and Transformation, Heriot Watt University.
  16. Lizal, Lubomir & Kocenda, Evzen, 2001. "State of corruption in transition: case of the Czech Republic," Emerging Markets Review, Elsevier, Elsevier, vol. 2(2), pages 138-160, June.
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