Ownership Concentration and Restructuring in Czech Manufacturing Sector
AbstractThe paper examines the dependence of firm restructuring on private outside ownership concentration in Czech manufacturing sector after privatization. It starts with the argumentation that the most important actors in the post-privatization ownership structure in the Czech Republic were investment privatization funds, followed by the state, and that the ‘rules of the game’ opened a large space for moral hazard. Based on the realization of these Czech specialties and on the logic of the break-through article by Morck, Shleifer and Vishny’s from 1988, the paper operationalizes the benefits and the costs of ownership concentration by four effects – incentive, manager-entrenchment, outsider-entrenchment and tunneling effects. This leads to the hypothesis that the concentration-restructuring function in the post- privatization Czech environment is increasing for sufficiently low as well as for sufficiently high values of concentration, while its slope in the inner band of concentration is attenuated or even negative due to the entrenchment and tunneling costs of concentration. This hypothesis is tested on an unbalanced panel data on 90 Czech companies for the years 1991-1998. OLS, FE and RE regressions with labor productivity on the left-hand sides partly confirm the hypothesis, especially the expected shape of the function for high and moderate concentration. However, no significant specification is found when instrumental variables are used to remove possible selection bias. Neither OLS, FE and RE, nor IV estimations showed a significant systematic relationship between private outside ownership concentration and the layoff and turnover ratios. The results in general report a negative effect of the state’s shareholding and a positive effect of insiders’ shareholding on restructuring.
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 EconWPA in its series Finance with number 0511004.
Length: 65 pages
Date of creation: 11 Nov 2005
Date of revision:
Note: Type of Document - pdf; pages: 65
Contact details of provider:
Web page: http://18.104.22.168
privatization; ownership concentration; corporate governance;
Find related papers by JEL classification:
- G - Financial Economics
This paper has been announced in the following NEP Reports:
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.:
- Earle, John S & Estrin, Saul, 1997. "After Voucher Privatization: The Structure of Corporate Ownership in Russian Manufacturing Industry," CEPR Discussion Papers 1736, C.E.P.R. Discussion Papers.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Wendy Carlin & John Van Reenen & Toby Wolfe, 1995. "Enterprise restructuring in early transition: the case study evidence from Central and Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 427-458, December.
- Robert E. Anderson & Simeon Dejankov & Gerhard Pohl & Stijn Claessons, 1997. "Privatization and Restructuring in Central and Eastern Europe," World Bank Other Operational Studies 11576, 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.
- Dusan Triska, 1996. "The Role of Investment Funds in the Czech Republic," William Davidson Institute Working Papers Series 23, William Davidson Institute at the University of Michigan.
- Pohl, G. & Anderson, R.E. & Claessens, S. & Djankov, S., 1997. "Privatization and Restructuring in Central and Eastern Europe: Evidence and Policy Options," Papers 368, World Bank - Technical Papers.
- Ellerman, David, 1998. "Voucher privatization with investment funds : an institutional analysis," Policy Research Working Paper Series 1924, The World Bank.
- Andrei Shleifer & Robert W. Vishny, 1996.
"A Survey of Corporate Governance,"
NBER Working Papers
5554, National Bureau of Economic Research, Inc.
- Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
- 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.
- Makhija, Anil K & Spiro, Michael, 2000. "Ownership Structure as a Determinant of Firm Value: Evidence from Newly Privatized Czech Firms," The Financial Review, Eastern Finance Association, vol. 35(3), pages 1-31, August.
- Cubbin, John S & Leech, Dennis, 1983. "The Effect of Shareholding Dispersion on the Degree of Control in British Companies: Theory and Measurement," Economic Journal, Royal Economic Society, vol. 93(37), pages 351-69, June.
- Vives,Xavier (ed.), 2000. "Corporate Governance," Cambridge Books, Cambridge University Press, number 9780521781640, December.
- Frantisek Turnovec, 1998. "Privatization, Ownership Structure and Transparency: How to Measure a Real Involvement of State," William Davidson Institute Working Papers Series 170, William Davidson Institute at the University of Michigan.
- David Ellerman, 1998. "Voucher Privatization with Investment Funds: An Institutional Analysis," William Davidson Institute Working Papers Series 167, William Davidson Institute at the University of Michigan.
- J Earle & S Estrin & L Leshchenko, 1996. "Ownership Structures," CEP Discussion Papers dp0315, Centre for Economic Performance, LSE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.