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Corporatization and Firm Performance: Evidence from Publicly-Provided Local Utilities

  • Cambini Carlo

    (Politecnico di Torino and HERMES-Italy)

  • Filippini Massimo

    (University of Lugano and ETH Zurich-Switzerland)

  • Piacenza Massimiliano

    (University of Torino, Ceris-CNR and HERMES-Italy)

  • Vannoni Davide

    (University of Torino and Collegio Carlo Alberto)

This study investigates the effects of the corporatization process – i.e., the transformation of a municipal firm into a limited liability company – on the production costs of local public services whose ownership is maintained by the local government. Theoretical analysis predicts that, even without privatization, corporatization is a potentially effective way to improve efficiency (Shleifer and Vishny, 1994; Stiglitz, 2000). We explore this issue by using information on a typical local utility, such as the bus service provided by public transit systems in Italy, which experienced a reform of the governance towards the corporatization structure during the ’90s. The results on a sample of 33 local bus companies over the period 1993-2002 show that, even if public ownership persists, the transformation of a municipal enterprise into an autonomous company – corresponding to the first stage of the corporatization of local utilities in Italy – or into a limited liability company exerts a reducing impact on production costs.

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Article provided by De Gruyter in its journal Review of Law & Economics.

Volume (Year): 7 (2011)
Issue (Month): 1 (July)
Pages: 191-213

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Handle: RePEc:bpj:rlecon:v:7:y:2011:i:1:n:9
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