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Ownership and 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 find that concentrated foreign ownership improves economic performance, but domestic private ownership does not, relative to state ownership. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labor cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and evidence against 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 a version of the hypothesis that firms restructure by first lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring while pursuing an employment objective, which is understandable in a period of rising unemployment. Our results hence portray the state as a more economically and socially beneficial agent than do some other recent studies.

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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 471a.

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Length: 39 pages
Date of creation: 01 Feb 2003
Date of revision:
Handle: RePEc:wdi:papers:2003-471a

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

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References

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Citations

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Cited by:
  1. Nivorozhkin, Eugene, 2004. "Financing Choices of Firms in EU Accession Countries," Ratio Working Papers, The Ratio Institute 33, The Ratio Institute.
  2. Catarina Figueira & Joseph Nellis & David Parker, 2009. "The effects of ownership on bank efficiency in Latin America," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(18), pages 2353-2368.
  3. Uppenberg, Kristian & Riess, Armin, 2004. "Determinants and growth effects of foreign direct investment," EIB Papers 3/2004, European Investment Bank, Economics Department.
  4. 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, William Davidson Institute at the University of Michigan 2004-718, William Davidson Institute at the University of Michigan.
  5. repec:hal:wpaper:halshs-00590865 is not listed on IDEAS
  6. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2005. "The Effects of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 124-134, February.
  7. Nivorozhkin, Eugene, 2004. "Financing choices of firms in EU accession countries," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 6/2004, Bank of Finland, Institute for Economies in Transition.
  8. Jana P. Fidrmuc, 2006. "Channels of Restructuring in Privatized Czech Companies," Working Papers, Warwick Business School, Finance Group wpn06-18, Warwick Business School, Finance Group.
  9. Nivorozhkin, Eugene, 2005. "Financing choices of firms in EU accession countries," Emerging Markets Review, Elsevier, Elsevier, vol. 6(2), pages 138-169, June.
  10. 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, August.
  11. Bilgehan Karabay & Gernot Pulverer & Ewa Weinmüller, 2009. "Foreign Ownership Restrictions: A Numerical Approach," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 33(4), pages 361-388, May.

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