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The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic

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  • Irena Grosfeld

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • Iraj Hashi

    (Faculty of Law and Business - Staffordshire University Business - Staffordshire University Business)

Abstract

Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we show that the ownership structure in the two countries has rapidly evolved since the initial distribution of property rights Ownership concentration has significantly increased and we can observe an important reallocation of ownership claims between different groups of shareholders. This evidence goes against the main argument of the critics of mass privatization concerned with the dispersed ownership structure these programs were supposed to generate. The fact that the degree of ownership concentration is similar in Poland and in the Czech Republic suggests that private benefits of control are large in both countries. However, when we consider the determinants of ownership concentration we find an interesting difference: in the Czech Republic the increase in ownership concentration is less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This contrasting effect may be interpreted in the light of the theory stressing the importance of the quality of the legal system for investors' behaviour: Poland is usually praised for high standards of its regulation while the Czech Republic, especially in the early and mid-1990s, has been blamed for its weaknesses. So, although direct comparison of ownership concentration in the two countries does not provide confirmation of the main prediction of "law matters" theory, we find indirect evidence in its favour.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00590865.

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Date of creation: Jan 2005
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Handle: RePEc:hal:psewpa:halshs-00590865

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Keywords: ownership concentration ; mass privatization ; corporate gouvernance ; transition;

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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
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  17. Irena Grosfeld & Thierry Tressel, 2002. "Competition and ownership structure: Substitutes or complements? Evidence from the Warsaw Stock Exchange," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(3), pages 525-551, November.
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Citations

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Cited by:
  1. Irena Grosfeld, 2009. "Large shareholders and firm value: Are high-tech firms different?," PSE Working Papers halshs-00587856, HAL.
  2. Irena Grosfeld, 2009. "Large shareholders and firm value: Are high-tech firms different?," Working Papers halshs-00587856, HAL.
  3. Irena Grosfeld, 2006. "Ownership concentration & firm performance: Evidence from an emerging market," William Davidson Institute Working Papers Series wp834, William Davidson Institute at the University of Michigan.
  4. Irena Grosfeld, 2006. "Ownership concentration and firm performance: Evidence from an emerging market," Working Papers halshs-00590485, HAL.

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