IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v37y2013i7p2605-2627.html
   My bibliography  Save this article

Ownership change, institutional development and performance

Author

Listed:
  • Knyazeva, Anzhela
  • Knyazeva, Diana
  • Stiglitz, Joseph E.

Abstract

This paper conducts a cross-country empirical study of the impact of institutions and agency conflicts on ownership reforms and their implications for changes in performance and efficiency. We examine two main questions. First, we evaluate the effects of certain property rights and institutional quality measures on performance and efficiency. We find that property rights and contracting rights protections contribute to stronger post-privatization performance. Second, we ask whether sectors undergoing changes from state to private ownership exhibit better or worse performance than sectors remaining public. We find an insignificant effect of privatization in ordinary least squares estimates and a negative short-term effect after correcting for endogeneity of privatization decisions that disappears in the long run, consistent with recently privatized enterprises facing short-run costs of restructuring and the challenges of mitigating agency and expropriation concerns.

Suggested Citation

  • Knyazeva, Anzhela & Knyazeva, Diana & Stiglitz, Joseph E., 2013. "Ownership change, institutional development and performance," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2605-2627.
  • Handle: RePEc:eee:jbfina:v:37:y:2013:i:7:p:2605-2627
    DOI: 10.1016/j.jbankfin.2013.02.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426613001052
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Karla Hoff & Joseph E. Stiglitz, 2004. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review, American Economic Association, vol. 94(3), pages 753-763, June.
    2. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2002. "Courts: the Lex Mundi Project," NBER Working Papers 8890, National Bureau of Economic Research, Inc.
    3. Paul H. Malatesta & Kathryn L. DeWenter, 2001. "State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity," American Economic Review, American Economic Association, vol. 91(1), pages 320-334, March.
    4. Ehrlich, Isaac & Georges Gallais-Hamonno & Zhiqiang Liu & Randall Lutter, 1994. "Productivity Growth and Firm Ownership: An Analytical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 1006-1038, October.
    5. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    6. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-452, June.
    7. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    8. repec:hrv:faseco:30747188 is not listed on IDEAS
    9. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    10. Uysal, Vahap B. & Kedia, Simi & Panchapagesan, Venkatesh, 2008. "Geography and acquirer returns," Journal of Financial Intermediation, Elsevier, vol. 17(2), pages 256-275, April.
    11. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
    12. Omran, Mohammed, 2004. "The Performance of State-Owned Enterprises and Newly Privatized Firms: Does Privatization Really Matter?," World Development, Elsevier, vol. 32(6), pages 1019-1041, June.
    13. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    14. Joseph Stiglitz & David Ellerman, 2000. "New Bridges Across the Chasm: Macro- and Micro-Strategies for Russia and other Transitional Economies," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 3(1), pages 41-72, May.
    15. Narjess Boubakri & Jean-Claude Cosset, 1998. "The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries," Journal of Finance, American Finance Association, vol. 53(3), pages 1081-1110, June.
    16. repec:hrv:faseco:30747162 is not listed on IDEAS
    17. Karla Hoff & Joseph E. Stiglitz, 2008. "Exiting a Lawless State," Economic Journal, Royal Economic Society, vol. 118(531), pages 1474-1497, August.
    18. Knyazeva, Anzhela & Knyazeva, Diana & Stiglitz, Joseph, 2009. "Ownership changes and access to external financing," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1804-1816, October.
    19. Jun-Koo Kang & Jin-Mo Kim, 2008. "The Geography of Block Acquisitions," Journal of Finance, American Finance Association, vol. 63(6), pages 2817-2858, December.
    20. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    21. 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.
    22. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
    23. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    24. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    25. Mathur, Ike & Banchuenvijit, Wanrapee, 2007. "The effects of privatization on the performance of newly privatized firms in emerging markets," Emerging Markets Review, Elsevier, vol. 8(2), pages 134-146, May.
    26. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, April.
    27. I. Serdar Dinc & Nandini Gupta, 2011. "The Decision to Privatize: Finance and Politics," Journal of Finance, American Finance Association, vol. 66(1), pages 241-269, February.
    28. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    29. Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
    30. Ronald W. Masulis & Cong Wang & Fei Xie, 2007. "Corporate Governance and Acquirer Returns," Journal of Finance, American Finance Association, vol. 62(4), pages 1851-1889, August.
    31. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.
    32. repec:hrv:faseco:30728041 is not listed on IDEAS
    33. Birdsall, Nancy & Nellis, John, 2003. "Winners and Losers: Assessing the Distributional Impact of Privatization," World Development, Elsevier, vol. 31(10), pages 1617-1633, October.
    34. Sergio Godoy & Joseph Stiglitz, 2006. "Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later," NBER Working Papers 11992, National Bureau of Economic Research, Inc.
    35. Li, Wei & Xu, Lixin Colin, 2002. "The Political Economy of Privatization and Competition: Cross-Country Evidence from the Telecommunications Sector," Journal of Comparative Economics, Elsevier, vol. 30(3), pages 439-462, September.
    36. Claessens,Constantijn A.*Djankov, Simeon, 1998. "Politicians and firms in seven central and eastern European countries," Policy Research Working Paper Series 1954, The World Bank.
    37. Wallsten, Scott J, 2001. "An Econometric Analysis of Telecom Competition, Privatization, and Regulation in Africa and Latin America," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 1-19, March.
    38. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane, 2005. "Postprivatization corporate governance: The role of ownership structure and investor protection," Journal of Financial Economics, Elsevier, vol. 76(2), pages 369-399, May.
    39. Villalonga, Belen, 2000. "Privatization and efficiency: differentiating ownership effects from political, organizational, and dynamic effects," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 43-74, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dong Zhou & Xingang Zhao, 2015. "Industrial Performance of the Renewable Resources Industry in China," Sustainability, MDPI, Open Access Journal, vol. 7(9), pages 1-22, August.
    2. Eugster, Nicolas, 2017. "Family firms and financial analyst activity," FSES Working Papers 491, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    3. Mouna Mrad & Slaheddine Hallara, 2014. "The Relationship Between the Board of Directors and the Performance/Value Creation in a Context of Privatization: The Case of French Companies," Public Organization Review, Springer, vol. 14(1), pages 83-108, March.
    4. Ben-Nasr, Hamdi & Cosset, Jean-Claude, 2014. "State Ownership, Political Institutions, and Stock Price Informativeness: Evidence from Privatization," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 179-199.
    5. Boardman, Anthony E. & Vining, Aidan R. & Weimer, David L., 2016. "The long-run effects of privatization on productivity: Evidence from Canada," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1001-1017.
    6. Brown, David J. & Earle, John S. & Telegdy, Almos, 2016. "Where does privatization work? Understanding the heterogeneity in estimated firm performance effects," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 329-362.
    7. Polona Domadenik & Janez Prašnikar & Jan Svejnar, 2016. "Political Connectedness, Corporate Governance, and Firm Performance," Journal of Business Ethics, Springer, vol. 139(2), pages 411-428, December.
    8. Knyazeva, Anzhela & Knyazeva, Diana & Stiglitz, Joseph, 2009. "Ownership changes and access to external financing," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1804-1816, October.
    9. I. Atiyas & P. Dogan, "undated". "Glass Half Empty? Politics and Institutions in the Liberalization of the Fixed Line Telecommunications in Turkey," Working Paper 33655, Harvard University OpenScholar.
    10. Li, Zhaohua & Yamada, Takeshi, 2015. "Political and economic incentives of government in partial privatization," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 169-189.

    More about this item

    Keywords

    Ownership change; Property rights; Privatization; Performance;

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:37:y:2013:i:7:p:2605-2627. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jbf .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.