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Divide and Privatize: Firm Break-up and Performance

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  • Evžen Kocenda
  • Jan Hanousek

Abstract

We analyze the long-term effects of firm break-up and ownership change on corporate performance. Our analysis is based on a unique data set for a large number of Czech firms spanning the period 1996–2005. We employ a propensity score matching procedure to deal with endogeneity problems. Our results, which are generally in line with the positive effects of firm break-up found in the developed-market literature, show that the initial effects of firm break-up are positive but after a certain point they quickly diminish over time. Factors like changes in ownership structure and management are to be found behind later improvements in the performance of firms.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-05/cesifo1_wp3465.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3465.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3465

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Keywords: break-up of firms; corporate performance; ownership changes; privatization; emerging markets; endogeneity; propensity score matching procedure;

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References

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  1. Estrin, Saul & Hanousek, Jan & Svejnar, Jan, 2009. "Effects of Privatization and Ownership in Transition Economies," Policy Research Working Paper Series 4811, The World Bank.
  2. Evžen Kocenda & Jan Hanousek, 2009. "State Ownership and Control in the Czech Republic," CESifo Working Paper Series 2801, CESifo Group Munich.
  3. D'Souza, Juliet & Megginson, William & Nash, Robert, 2007. "The effects of changes in corporate governance and restructurings on operating performance: Evidence from privatizations," Global Finance Journal, Elsevier, vol. 18(2), pages 157-184.
  4. Dehejia, R.H. & Wahba, S., 1998. "Propensity Score Matching Methods for Non-Experimental Causal Studies," Discussion Papers 1998_02, Columbia University, Department of Economics.
  5. Grosfeld, Irena & Roland, Gérard, 1995. "Defensive and Strategic Restructuring in Central European Enterprises," CEPR Discussion Papers 1135, C.E.P.R. Discussion Papers.
  6. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
  7. Shin, G. Hwan, 2008. "The profitability of asset sales as an explanation of asset divestitures," Pacific-Basin Finance Journal, Elsevier, vol. 16(5), pages 555-571, November.
  8. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, 1999. "What Determines Firm Size?," NBER Working Papers 7208, National Bureau of Economic Research, Inc.
  9. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 12 Feb 2014.
  10. Evžen Kočenda, 1999. "Residual State Property in the Czech Republic," Eastern European Economics, M.E. Sharpe, Inc., vol. 37(5), pages 6-35, October.
  11. Roland, Gérard, 1994. "On the Speed and Sequencing of Privatization and Restructuring," CEPR Discussion Papers 942, C.E.P.R. Discussion Papers.
  12. Bartel, Ann P. & Harrison, Ann E., 2000. "Ownership versus environment : disentangling the sources of public sector inefficiency," Policy Research Working Paper Series 2272, The World Bank.
  13. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2005. "Origin and Concentration: Corporate Ownership, Control and Performance," CERGE-EI Working Papers wp259, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  14. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, December.
  15. Stepan Jurajda & Juraj Stancik, 2009. "Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry," CERGE-EI Working Papers wp389, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  16. Lizal, Lubomir & Singer, Miroslav & Svejnar, Jan, 1997. "Enterprise Break-ups and Performance During the Transition," CEPR Discussion Papers 1757, C.E.P.R. Discussion Papers.
  17. 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.
  18. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  19. Polona Domadenik & Lubomir Lizal & Marko Pahor, 2003. "Effect of Enterpise Break-Ups on Performance: Case of Former Yugoslav Republic of Macedonia," CERGE-EI Working Papers wp216, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  20. Aghion, Philippe & Blanchard, Olivier J & Carlin, Wendy, 1994. "The Economics of Enterprise Restructuring in Central and Eastern Europe," CEPR Discussion Papers 1058, C.E.P.R. Discussion Papers.
  21. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "Divestitures, privatization and corporate performance in emerging markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 43-73, 01.
  22. Jan Hanousek & Libor Nemecek, 2001. "Czech parallel capital markets: discrepancies and inefficiencies," Applied Financial Economics, Taylor & Francis Journals, vol. 11(1), pages 45-55.
  23. Andrei Shleifer & Daniel Treisman, 2005. "A Normal Country: Russia After Communism," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 151-174, Winter.
  24. Myeong-Hyeon Cho & Mark A. Cohen, 1997. "The economic causes and consequences of corporate divestiture," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 367-374.
  25. Polona Domadenik & Janez Prašnikar & Jan Svejnar, 2008. "Restructuring of firms in transition: ownership, institutions and openness to trade," Journal of International Business Studies, Palgrave Macmillan, vol. 39(4), pages 725-746, June.
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Cited by:
  1. Richard Frensch & Achim Schmillen, 2013. "The Penn Effect and Transition: The New EU Member States in International Perspective," Comparative Economic Studies, Palgrave Macmillan, vol. 55(1), pages 99-119, March.

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