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Ownership and control in Central and Eastern Europe

Author

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  • Gugler, Klaus
  • Ivanova, Natalia
  • Zechner, Josef

Abstract

The unique natural experiment of the fall of the iron curtain led to large institutional and governance differences across countries. This allows us to observe the evolution of ownership and control after an initial shock. We utilize this cross-time/cross-country variation in institutions and privatization methods to analyze the determinants and effects of individual investor control in a large sample of firms in 11 CEE countries over the period 2000–2007. Controlling for possible endogeneity and firm effects, we find that large individual investors add value to the firms they control. They do so predominantly compared to state controlled firms but also compared to other privately controlled firms. If large individual investor firms employ professional managers and (only) supervise them actively, they achieve the better performance improvements in Tobin's q than the firms managed by their controlling shareholders. Concerning the determinants of ownership, large individual shareholders substitute for missing good country governance institutions, and ownership is very sticky, since initial conditions (privatization methods) still matter. It appears that secondary markets do not converge on the same ownership equilibria as primary markets do.

Suggested Citation

  • Gugler, Klaus & Ivanova, Natalia & Zechner, Josef, 2014. "Ownership and control in Central and Eastern Europe," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 145-163.
  • Handle: RePEc:eee:corfin:v:26:y:2014:i:c:p:145-163
    DOI: 10.1016/j.jcorpfin.2014.03.001
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    Cited by:

    1. Cărăuşu Nicuşor Dumitru, 2016. "Ownership and Control in Large Eastern European Companies," Scientific Annals of Economics and Business, De Gruyter Open, vol. 63(2), pages 181-193, June.
    2. Bykova, Anna & Molodchik, Mariia & Shamilova, Ekaterina, 2017. "Ownership concentration, corporate governance development and firm performance in Russian listed companies," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 45, pages 50-74.

    More about this item

    Keywords

    Corporate governance; Ownership and control; Firm performance;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • K - Law and Economics

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