Private ownership and corporate performance : some lessons from transition economies
AbstractUsing a large sample of data on mid-sized firms in the Czech Republic, Hungary, and Poland, the authors compare the performance of privatized and state firms in the environment of the postcommunist transition. They find strong evidence that private ownership--except for worker ownership-- dramatically improves corporate performance. They find no evidence of the"privatization shock"that was supposed to afflict the behavior of firms undergoing rapid changes in ownership. Instead, they observe a severe shock from marketization, affecting both state and privatized firms--but a shock for which private ownership provides a powerful antidote. Among their other findings are : a) Private ownership is most effective in improving a firm's ability to generate revenues, an area in which entrepreneurship seems to be required. Ownership also affects a firm's ability to remove the rather obvious cost inefficiencies inherited from the past, but this effect is less pronounced, as both state and privatized firms engage in significant cost restructuring. b) Privatized firms generate significantly more employment gains than state firms. It is their superior ability to generate revenues, rather than competence at cost-cutting, that allows them to sustain or expand employment. This is why privatization is the dominant strategy for expanding employment in transition. c) Outsider-owned firms perform better than insider-owned firms on most performance measures, but there is enough difference between employee- and manager-owned firms to suggest that putting all insiders under a common umbrella is unjustified. Although the effects of managerial ownership are ambiguous, putting employees in control appears to offer no advantages over state ownership on any measure and creates a distinct disadvantage in terms of employment performance. d) Among outsider owners, privatization funds seem to do as well at revitalizing the privatized companies as do other outsider owners; in particular, the authors find no evidence that funds are less effective than'strategic'investors. And foreign investors provide perhaps less of an edge than might have been expected; their impact appears no stronger than that of major domestic outsiders.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 1830.
Date of creation: 30 Sep 1997
Date of revision:
Small and Medium Size Enterprises; Small Scale Enterprise; Microfinance; Banks&Banking Reform; International Terrorism&Counterterrorism; Microfinance; Private Participation in Infrastructure; Small Scale Enterprise; Banks&Banking Reform; Financial Crisis Management&Restructuring;
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.:
- Djankov, Simeon & Pohl, Gerhard, 1997. "The restructuring of large firms in Slovakia," Policy Research Working Paper Series 1758, The World Bank.
- Stijn Claesens & Simeon Djankov & Gerhard Pohl, 1997.
"Ownership and Corporate Governance : Evidence from the Czech Republic,"
World Bank Other Operational Studies
11584, The World Bank.
- Claessens, Stijn & Djankov, Simeon & Pohl, Gerhard, 1997. "Ownership and corporate governance : evidence from the Czech Republic," Policy Research Working Paper Series 1737, The World Bank.
- Simeon Djankov & Gerhard Pohl, 1997. "Restructuring of Large Firms in Slovakia," William Davidson Institute Working Papers Series 73, William Davidson Institute at the University of Michigan.
- Brian Pinto & Marek Belka & Stefan Krajewski, 1993. "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 213-270.
- Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
- Pinto, Brian & van Wijnbergen, Sweder, 1995.
"Ownership and Corporate Control in Poland: Why State Firms Defied the Odds,"
CEPR Discussion Papers
1273, C.E.P.R. Discussion Papers.
- Pinto, Brian & van Wijnbergen, Sweder, 1994. "Ownership and corporate control in Poland : why state firms defied the odds," Policy Research Working Paper Series 1308, The World Bank.
- 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.
- Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, Octomber.
- Djankov, Simeon, 1999.
"Ownership structure and enterprise restructuring in six newly independent states,"
Policy Research Working Paper Series
2047, The World Bank.
- Simeon Djankov, 1999. "Ownership Structure and Enterprise Restructuring in Six Newly Independent States," Comparative Economic Studies, Palgrave Macmillan, vol. 41(1), pages 75-95, April.
- Irina Akimova & Gerhard Schwödiauer, 1999. "Restructuring of Ukrainian Enterprises after Privatization: Does Ownership Structure Matter?," Industrial Organization 9903003, EconWPA.
- Anibal Insfran Pelozo, Jose, 2001. "Privatization in Paraguay: some lessons," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(5), pages 737-753.
- Burki, Abid A. & Ahmad, Shabbir, 2010. "Bank governance changes in Pakistan: Is there a performance effect?," Journal of Economics and Business, Elsevier, vol. 62(2), pages 129-146, March.
- Lawrence Peter King, 1999. "The Developmental Consequences of Foreign Direct Investment in the Transition from Socialism to Capitalism: The Performance of Foreign Owned Firms in Hungary," William Davidson Institute Working Papers Series 277, William Davidson Institute at the University of Michigan.
- Marc Duponcel, 1998. "Restructuring of food industries in the five Central and Eastern European front-runners towards EU membership (CEEC-5). A comparative review," CERT Discussion Papers 9806, Centre for Economic Reform and Transformation, Heriot Watt University.
- Wang, Hua & Jin, Yanhong H., 2002. "Ownership And Industrial Pollution Control: Evidence From China," 2002 Annual meeting, July 28-31, Long Beach, CA 19671, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Yurii Perevalov & Ilya Gimadii & Vladimir Dobrodei, 2000. "Does Privatisation Improve Performance of Industrial Enterprises? Empirical Evidence from Russia," Post-Communist Economies, Taylor & Francis Journals, vol. 12(3), pages 337-363.
- Tatahi, Motasam, 2010. "Enterprise Performance, Privatization and the Role of Ownership in the UK," MPRA Paper 27065, University Library of Munich, Germany.
- Tatahi, Motasam, 2010. "Enterprise Performance, Privatization and the Role of Ownership in Portugal," MPRA Paper 27063, University Library of Munich, Germany.
- Tatahi, Motasam, 2010. "Enterprise Performance, Privatization and the Role of Ownership in Italy," MPRA Paper 27059, University Library of Munich, Germany.
- Tatahi, Motasam, 2010. "Enterprise Performance, Privatization and the Role of Ownership in France," MPRA Paper 27056, University Library of Munich, Germany.
- Estrin, Saul & Rosevear, Adam, 1999. "Enterprise performance and ownership: The case of Ukraine," European Economic Review, Elsevier, vol. 43(4-6), pages 1125-1136, April.
- Cull, Robert & Matesova, Jana & Shirley, Mary, 2001. "Ownership structure and the temptation to loot : evidence from privatized firms in the Czech Republic," Policy Research Working Paper Series 2568, The World Bank.
- Alan Bevan & Saul Estrin & Mark E. Schaffer, 1999. "Determinants of Enterprise Performance during Transition," CERT Discussion Papers 9903, Centre for Economic Reform and Transformation, Heriot Watt University.
- Djankov, Simeon, 1999. "Restructuring of insider-dominated firms," Policy Research Working Paper Series 2046, The World Bank.
- Köke, Jens, 1999. "Institutional investment in Central and Eastern Europe: investment criteria of Western portfolio managers," ZEW Discussion Papers 99-37, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Muravyev, Alexander & Bilyk, Olga & Grechaniuk, Bogdana, 2009.
"Firm Performance and Managerial Turnover: The Case of Ukraine,"
13685, University Library of Munich, Germany.
- Muravyev, Alexander & Talavera, Oleksandr & Bilyk, Olga & Grechaniuk, Bogdana, 2009. "Firm Performance and Managerial Turnover: The Case of Ukraine," IZA Discussion Papers 4372, Institute for the Study of Labor (IZA).
- Tatahi, Motasam, 2010. "Enterprise Performance, Privatization and the Role of Ownership in Poland," MPRA Paper 27062, University Library of Munich, Germany.
- Schnytzer, Adi & Andreyeva, Tatiana, 2002. "Company performance in Ukraine: is this a market economy?," Economic Systems, Elsevier, vol. 26(2), pages 83-98, June.
- Tatahi, Motasam, 2010. "Enterprise performance, privatization and the role of ownership in Germany," MPRA Paper 27057, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.