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Ownership, Control and Corporate Performance after Large-Scale Privatization

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Author Info

  • Jan Hanousek

    (CERGE-EI)

  • Evzen Kocenda

    (CERGE-EI)

  • Jan Svejnar

    (University of Michigan)

Abstract

We analyze the effects of ownership type and concentration on performance of a population of firms in a model large-scale privatization economy. Using specifications based on first-differences and unique instrumental variables, we find that few types of private ownership improve dynamic post-privatization performance. Concentrated foreign (but not domestic) ownership improves some measures of performance relative to state ownership. Foreign investors engage in strategic restructuring by increasing the rate of change of sales, while domestic private owners reduce the rate of change of labor cost without increasing profitability. The effects of concentrated foreign ownership support the agency theory and go against theories stressing the positive effects of managerial autonomy and initiative. Our results are also consistent with the thesis that large domestic stockholders are not improving performance because they loot the firms. We find some support for the hypothesis that firms restructure by first lowering and later increasing the rate of change of employment. The state as a holder of the golden share has a positive effect on employment, while stimulating profitable restructuring. The state hence appears as a more economically and socially helping agent than in some recent studies.

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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0406002.

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Length: 50 pages
Date of creation: 04 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpmi:0406002

Note: Type of Document - pdf; pages: 50
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Web page: http://128.118.178.162

Related research

Keywords: ownership; performance; privatization; corporate governance; panel data; endogeneity; industrial organization;

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References

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Citations

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Cited by:
  1. Fungacova, Zuzana & Hanousek, Jan, 2006. "A castle built on sand: The effects of mass privatization on stock market creation in transition economies," BOFIT Discussion Papers 14/2006, Bank of Finland, Institute for Economies in Transition.
  2. Sabirianova, Klara & Svejnar, Jan & Terrell, Katherine, 2005. "Foreign Investment, Corporate Ownership, and Development: Are Firms in Emerging Markets Catching Up to the World Standard?," CEPR Discussion Papers 4868, C.E.P.R. Discussion Papers.
  3. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frédéric, 2003. "The Effects of Privatization and Competitive Pressure on Firms’ Price-Cost Margins: Micro Evidence from Emerging Economies," Working Papers 03-17, University of Aarhus, Aarhus School of Business, Department of Economics.
  4. Irena Grosfeld & Iraj Hashi, 2005. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," Working Papers halshs-00590865, HAL.
  5. Andrei Medvedev & Alena Zemplinerová, 2005. "Does Competition Improve Performance? Evidence from the Czech Manufacturing Industries," Prague Economic Papers, University of Economics, Prague, vol. 2005(4), pages 317-330.
  6. Afontsev, S., 2013. "Privatize or Not? Escaping Budget Temptation and Nirvana Fallacy," Journal of the New Economic Association, New Economic Association, vol. 20(4), pages 150-153.
  7. Burcu Aydin, 2008. "Banking Structure and Credit Growth in Central and Eastern European Countries," IMF Working Papers 08/215, International Monetary Fund.
  8. 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.

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