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Ownership and Firm Performance After Large-Scale Privatization

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Author Info
Kocenda, Evzen
Svejnar, Jan

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Abstract

We analyse 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-owned firms. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labour cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and contradicting theories stressing the positive effects of managerial autonomy and initiative. Our results are also consistent with the thesis that the presence of a large domestic stockholder may not result in a superior performance if this shareholder ‘loots’ the firm. We find support for the hypothesis that firms restructure by lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring, while pursuing a socially understandable employment objective in a period of rising unemployment. Our results hence depict the state in transition economies as a much more economically and socially beneficial agent that many recent theoretical studies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4143.

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Date of creation: Dec 2003
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Handle: RePEc:cpr:ceprdp:4143

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

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D20 - Microeconomics - - Production and Organizations - - - General
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2003. "The Effect of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," CEPR Discussion Papers 3703, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Nivorozhkin, Eugene, 2004. "Financing choices of firms in EU accession countries," BOFIT Discussion Papers 6/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  3. Nivorozhkin, Eugene, 2004. "Financing Choices of Firms in EU Accession Countries," Ratio Working Papers 33, The Ratio Institute. [Downloadable!]
  4. Irena Grosfeld & Iraj Hashi, 2004. "The Emergence of Large Shareholders in Mass Privatized Firms: Evidence from Poland and the Czech Republic," Working Papers 2004.126, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  5. Renata Kosova, 2006. "Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic," Working Papers 0006, School of Business, The George Washington University. [Downloadable!]
  6. Renata Kosova & Meghana Ayyagari, 2006. "Does FDI facilitate Domestic Entrepreneurship? Evidence from the Czech Republic," Working Papers 0008, School of Business, The George Washington University. [Downloadable!]
  7. Bilgehan Karabay & Gernot Pulverer & Ewa Weinmüller, 2009. "Foreign Ownership Restrictions: A Numerical Approach," Computational Economics, Springer, vol. 33(4), pages 361-388, May. [Downloadable!] (restricted)
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