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State Ownership and Control in the Czech Republic

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Author Info
Evžen Kocenda ()
Jan Hanousek ()
Abstract

We analyze the extent of the integrated control of the state over privatized firms during the post-privatization decade (1995–2005) in the Czech Republic. During this period the integrated control potential of the state resembled a corporate pyramid. While pyramidal control was not fully utilized, the golden share in the hands of the state substantially enhanced its ability to control firms. In terms of corporate performance we show that state control resulted in declining and even negative corporate performance. Integrated state control was shown to be mostly inferior when compared with private types of ownership. State ownership positions are in striking contrast with the lack of capacity to push corporate performance in order to collect larger tax volumes. Lack of focus and inter-agency cooperation as well as the simple inefficiency of the state bureaucracy are the most likely reasons behind our findings.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2801.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2801

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Related research
Keywords: state ownership; control; corporate performance; privatization;

Find related papers by JEL classification:
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D29 - Microeconomics - - Production and Organizations - - - Other
G30 - Financial Economics - - Corporate Finance and Governance - - - General
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

References listed on IDEAS
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  1. Raj Aggarwal & Joel T. Harper, 2000. "Equity Valuation in the Czech Voucher Privatization Auctions," Financial Management, Financial Management Association, vol. 29(4), Winter.
  2. Daphne Yiu & Yuan Lu, 2005. "Understanding Business Group Performance in an Emerging Economy: Acquiring Resources and Capabilities in Order to Prosper," Journal of Management Studies, Blackwell Publishing, vol. 42(1), pages 183-206, 01. [Downloadable!] (restricted)
  3. Randall Morck & Daniel Wolfenzon & Bernard Yeung, 2005. "Corporate Governance, Economic Entrenchment, and Growth," Journal of Economic Literature, American Economic Association, vol. 43(3), pages 655-720, September. [Downloadable!] (restricted)
    Other versions:
  4. Ariane Chapelle & Ariane Szafarz, 2005. "Controlling firms through the Majority Voting Rule," Working Papers CEB 05-004.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
    Other versions:
  5. Tarun Khanna & Yishay Yafeh, 2007. "Business Groups in Emerging Markets: Paragons or Parasites?," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 331-372, June.
  6. Cull, Robert & Matesova, Jana & Shirley, Mary, 2002. "Ownership and the Temptation to Loot: Evidence from Privatized Firms in the Czech Republic," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 1-24, March. [Downloadable!] (restricted)
  7. Hanousek, Jan & Kroch, Eugene A, 1998. "The Two Waves of Voucher Privatization in the Czech Republic: A Model of Learning in Sequential Bidding," Applied Economics, Taylor and Francis Journals, vol. 30(1), pages 133-43, January. [Downloadable!] (restricted)
  8. John Bennett & Saul Estrin & James Maw, 2005. "Why did Transition Economies Choose Mass Privatization?," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 567-575, 04/05. [Downloadable!] (restricted)
  9. Joel Hellman & Mark Schankerman, 2000. "Intervention, Corruption and Capture: The Nexus between Enterprises and the State," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(3), pages 545-576, November. [Downloadable!] (restricted)
  10. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February. [Downloadable!] (restricted)
  11. Orlowski, Lucjan T., 2008. "Relative inflation-forecast as monetary policy target for convergence to the euro," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1061-1081. [Downloadable!] (restricted)
  12. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September. [Downloadable!] (restricted)
  13. Heitor V. Almeida & Daniel Wolfenzon, 2006. "A Theory of Pyramidal Ownership and Family Business Groups," Journal of Finance, American Finance Association, vol. 61(6), pages 2637-2680, December. [Downloadable!] (restricted)
  14. Jan Hanousek & Evžen Kočenda, 2008. "Potential of the state to control privatized firms," Economic Change and Restructuring, Springer, vol. 41(2), pages 167-186, June. [Downloadable!] (restricted)
  15. Randall Morck, 2009. "The Riddle of the Great Pyramids," NBER Working Papers 14858, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Chernykh, Lucy, 2008. "Ultimate ownership and control in Russia," Journal of Financial Economics, Elsevier, vol. 88(1), pages 169-192, April. [Downloadable!] (restricted)
  17. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November. [Downloadable!] (restricted)
  18. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel, 2003. "Seize the state, seize the day: state capture and influence in transition economies," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 751-773, December. [Downloadable!] (restricted)
  19. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04. [Downloadable!] (restricted)
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This page was last updated on 2009-11-3.

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