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The Effects of Ownership Forms and Concentration on Firm Performance after Large-Scale Privatization

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  • Jan Svejnar

    ()

  • Evzen Kocenda

Abstract

We analyze 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 reject the hypothesis that domestic or foreign private ownership, in either moderate or high ownership concentrations, leads to increased sales. However, private domestic and foreign majority and significant minority owners, as well as dispersed owners, increase profitability relative to state-owned firms. Firms with dispersed ownership register higher positive effect on profit than firms with more concentrated ownership, thus giving support to theories stressing managerial autonomy and initiative. Foreign owners with high as well as moderate concentrations of ownership uniformly reduce financial leverage, as do majority domestic owners. Domestic banks and portfolio companies as single largest owners (SLO) are incapable of carrying out major restructuring. Foreign industrial company SLOs carry out strategic restructuring in production and financing without deviating from the state ownership benchmark in terms of the labor cost. The effect of SLO does not vary with the SLO's concentration of ownership. Overall, private ownership tends to be associated with superior performance in terms of some indicators but not others, and dispersed ownership results in better or equal performance than more concentrated forms of ownership.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 471.

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Length: 46 pages
Date of creation: 01 May 2002
Date of revision:
Handle: RePEc:wdi:papers:2002-471

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

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References

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Cited by:
  1. Lubomír Lízal & Dietrich Earnhart, 2002. "Effects of Ownership and Financial Status on Corporate Environmental Performance," William Davidson Institute Working Papers Series 492, William Davidson Institute at the University of Michigan.
  2. Attiya Y. Javid & Robina Iqbal, 2010. "Corporate Governance in Pakistan: Corporate Valuation, Ownership and Financing," PIDE-Working Papers 2010:57, Pakistan Institute of Development Economics.
  3. Earnhart, Dietrich & Lizal, Lubomir, 2006. "Effects of ownership and financial performance on corporate environmental performance," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 111-129, March.
  4. Patrick Hamm & David Stuckler & Lawrence King, 2006. "Mass Privatization and the Postcommunist Mortality Crisis," Working Papers wp118, Political Economy Research Institute, University of Massachusetts at Amherst.
  5. Cornelli, Francesca & Li, David Daokui, 2006. "Ex Ante Effects of Ex Post Managerial Ownership," CEPR Discussion Papers 5821, C.E.P.R. Discussion Papers.
  6. Druk-Gal, Bat-Sheva & Yaari, Varda, 2006. "Incumbent employees' resistance to implementing privatization policy," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 374-405, March.
  7. Dietrich Earnhart & Lubomir Lizal, 2007. "Does Better Environmental Performance Affect Revenues, Cost, or Both? Evidence From a Transition Economy," William Davidson Institute Working Papers Series wp856, William Davidson Institute at the University of Michigan.

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