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Ownership and Firm Performance after Large-Scale Privatization

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Author Info
Jan Svejnar ()
Evzen Kocenda ()

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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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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School 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
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Handle: RePEc:wdi:papers:2003-471a

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

Other versions of this item:

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D20 - Microeconomics - - Production and Organizations - - - General
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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References listed on IDEAS
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.:
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  7. Stijn Claessens & Simeon Djankov, 1999. "Ownership Concentration and Corporate Performance in the Czech Republic," William Davidson Institute Working Papers Series 227, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Nivorozhkin, Eugene, 2004. "Financing Choices of Firms in EU Accession Countries," Ratio Working Papers 33, The Ratio Institute. [Downloadable!]
  2. Irena Grosfeld & Iraj Hashi, 2004. "The Emergence of Large Shareholders in Mass Privatized Firms: Evidence from Poland and the Czech Republic," Working Papers 2004.126, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  3. Renata Kosova, 2006. "Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic," Working Papers 0006, School of Business, The George Washington University. [Downloadable!]
  4. Renata Kosova & Meghana Ayyagari, 2006. "Does FDI facilitate Domestic Entrepreneurship? Evidence from the Czech Republic," Working Papers 0008, School of Business, The George Washington University. [Downloadable!]
  5. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2003. "The Effect of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," CEPR Discussion Papers 3703, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Nivorozhkin, Eugene, 2004. "Financing choices of firms in EU accession countries," BOFIT Discussion Papers 6/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  7. repec:bep:eaptop:v:4:y:2004:i:1:p:1205-1205 is not listed on IDEAS
  8. Bilgehan Karabay & Gernot Pulverer & Ewa Weinmüller, 2009. "Foreign Ownership Restrictions: A Numerical Approach," Computational Economics, Springer, vol. 33(4), pages 361-388, May. [Downloadable!] (restricted)
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