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Ownership and Firm Performance After Large-Scale Privatization

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  • Kocenda, Evzen
  • Svejnar, Jan

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

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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. 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.
  3. Nivorozhkin, Eugene, 2004. "Financing Choices of Firms in EU Accession Countries," Ratio Working Papers 33, The Ratio Institute.
  4. Nivorozhkin, Eugene, 2005. "Financing choices of firms in EU accession countries," Emerging Markets Review, Elsevier, vol. 6(2), pages 138-169, June.
  5. Jana P. Fidrmuc, 2006. "Channels of Restructuring in Privatized Czech Companies," Working Papers wpn06-18, Warwick Business School, Finance Group.
  6. Irena Grosfeld & Iraj Hashi, 2005. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," PSE Working Papers halshs-00590865, HAL.
  7. Irena Grosfeld & Iraj Hashi, 2005. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," Working Papers halshs-00590865, HAL.
  8. 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, October.
  9. Uppenberg, Kristian & Riess, Armin, 2004. "Determinants and growth effects of foreign direct investment," EIB Papers 3/2004, European Investment Bank, Economics Department.
  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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