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Choice of ownership structure and firm performance: Evidence from Estonia

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Author Info

  • Jones, Derek C.

    ()
    (BOFIT)

  • Kalmi, Panu

    ()
    (BOFIT)

  • Mygind, Niels

    ()
    (BOFIT)

Abstract

In this paper we use rich panel data for a representative sample of Estonian enterprises to analyse diverse issues related to the determinants of ownership structures and ownership changes after privatisation. A key focus is to determine whether ownership changes are related to economic efficiency. While employee owned firms are found to be much more prone than other firms to switch ownership categories, often “employee owned” firms remain “insider-owned” as ownership passes from current employees to managers and former employees. Logit analyses of the determinants of ownership structures and ownership changes provides mixed support for several hypotheses. As predicted: (i) wealth and resource constraints play a crucial role in the determination of ownership, with foreigners buying firms with the highest equity levels and insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent ownership changes, especially away from employee ownership; (iii) allocation of ownership depends on the pre-privatisation origin and location of the firm, and these factors also influence subsequent ownership changes. Finally we compare our findings with those achieved by using more conventional approaches to analyze efficiency that use very similar data. Reassuringly the evidence presented in this paper is consistent with the view that efficiency considerations drive ownership changes (while earlier analysis for Estonia and for many other transition economies has identified the impact of ownership on economic performance.) However, the findings in this paper also establish that there are important influences besides economic efficiency that affect enterprise ownership and ownership changes.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 7/2003.

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Length: 43 pages
Date of creation: 27 May 2003
Date of revision:
Handle: RePEc:hhs:bofitp:2003_007

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
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Fax: + 358 10 831 2294
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Keywords: privatisation; ownership change; employee ownership; transition economies; Estonia;

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References

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  1. Derek C. Jones & Panu Kalmi & Niels Mygind, 2003. "Choice of ownership structure and firm performance: Evidence from Estonia," Macroeconomics 0305008, EconWPA.
  2. Jones, Derek C & Mygind, Niels, 2002. "Ownership and Productive Efficiency: Evidence from Estonia," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 284-301, June.
  3. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter.
  4. Ben-Ner, Avner & Jun, Byoung, 1996. "Employee Buyout in a Bargaining Game with Asymmetric Information," American Economic Review, American Economic Association, vol. 86(3), pages 502-23, June.
  5. Miyazaki, Hajime, 1984. "On Success and Dissolution of the Labor-Managed Firm in the Capitalist Economy," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 909-31, October.
  6. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
  7. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  8. Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
  9. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers.
  10. Maxim Boycko & Andrei Shleifer & Robert W. Vishny, 1993. "Privatizing Russia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 139-192.
  11. Ben-ner, Avner, 1988. "The life cycle of worker-owned firms in market economies : A theoretical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 10(3), pages 287-313, October.
  12. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
  13. Igor Filatotchev & Mike Wright & Michael Bleaney, 1999. "Privatization, insider control and managerial entrenchment in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 481-504, July.
  14. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  15. Estrin, Saul & Wright, Mike, 1999. "Corporate Governance in the Former Soviet Union," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 395-397, September.
  16. Jones, Derek C. & Mygind, Niels, 1999. "The Nature and Determinants of Ownership Changes after Privatization: Evidence from Estonia," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 422-441, September.
  17. Estrin, Saul & Wright, Mike, 1999. "Corporate Governance in the Former Soviet Union: An Overview," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 398-421, September.
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Cited by:
  1. Grosfeld, Irena, 2009. "Large shareholders and firm value: Are high-tech firms different?," Economic Systems, Elsevier, vol. 33(3), pages 259-277, September.
  2. Curtiss, Jarmila & Medonos, Tomas & Ratinger, Tomas, 2005. "Ownership Form Effect on Large-Scale Farms' Performance: Case of Czech Agriculture," 94th Seminar, April 9-10, 2005, Ashford, UK 24435, European Association of Agricultural Economists.
  3. Irena Grosfeld & Iraj Hashi, 2004. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," William Davidson Institute Working Papers Series 2004-718, William Davidson Institute at the University of Michigan.
  4. Derek Jones & Panu Kalmi & Niels Mygind, 2005. "Choice of Ownership Structure and Firm Performance: Evidence from Estonia," Post-Communist Economies, Taylor & Francis Journals, vol. 17(1), pages 83-107.
  5. Curtiss, Jarmila & Ratinger, Tomáš & Medonos, Tomáš, 2012. "Ownership and Investment Behaviour in Transition Countries: A Case Study of Collective and Corporate Farms in the Czech Republic," Factor Markets Working Papers 121, Centre for European Policy Studies.
  6. Hu, Zhining & Zheng, Jianghuai & Wang, Jialing, 2011. "Impact of industrial linkages on firm performance in development zones," MPRA Paper 33127, University Library of Munich, Germany.

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