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Privatization, corporate control and regulatory reform: the case of Telefonica

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  • Bel, Germà
  • Trillas, Francesc

Abstract

This study analyzes the interaction of agency problems in public policy and of agency problems inside the firm: it investigates the case of a large privatized firm subject to many policy constraints. The last steps of Telefonica's privatization were designed to promote a dispersed ownership and give managers a high level of discretion in running the company. This effectively created an agency problem inside the firm. There were no powerful shareholders to constrain the managers, and the threat of a takeover was not a credible one, since the government kept a golden share. There is no overall evidence of capture of politicians and regulators by managers in the interest of shareholders, although evidence suggests the existence of collusion between politicians and managers. The authors interpret the political interference with the firm's control (a well-documented phenomenon both in this study and in the cross-country literature on privatization; e.g. political ends in privatization, influence in appointments, golden shares) as the most visible part of such collusion. Liberalization and multi-level regulation will likely make any type of collusion or capture more difficult in the future.

Suggested Citation

  • Bel, Germà & Trillas, Francesc, 2005. "Privatization, corporate control and regulatory reform: the case of Telefonica," Telecommunications Policy, Elsevier, vol. 29(1), pages 25-51, February.
  • Handle: RePEc:eee:telpol:v:29:y:2005:i:1:p:25-51
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    References listed on IDEAS

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    9. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, May.
    10. Trillas, Francesc, 2001. "The takeover of Enersis: the control of privatized utilities," Utilities Policy, Elsevier, vol. 10(1), pages 25-45, March.
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    Citations

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    Cited by:

    1. Massón-Guerra, José Luis, 2007. "Evolución de la Eficiencia Productiva de una empresa privatizada: El Caso del Grupo Telefónica de España
      [Productive Efficiency in Telefonica]
      ," MPRA Paper 13463, University Library of Munich, Germany.
    2. Alejandro Riaño & Alberto E. Chong, 2006. "Political Environment and Privatization Prices," IDB Publications (Working Papers) 1563, Inter-American Development Bank.
    3. Germán Horacio Cardona Vélez, 2014. "Análisis del impacto de los cambios del control corporativo sobre el valor de las empresas en América Latina," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, June.
    4. Ganuza, Juan José & Viecens, María Fernanda, 2011. "Deployment of high-speed broadband infrastructures during the economic crisis. The case of Xarxa Oberta," Telecommunications Policy, Elsevier, vol. 35(9), pages 857-870.
    5. John Jairo García Rendón & Diego F. Linares, 2018. "Price wars in a highly concentrated industry: Mobile communication voice services," DOCUMENTOS DE TRABAJO CIEF 016449, UNIVERSIDAD EAFIT.
    6. Alberto Chong & Alejandro Riaño, 2006. "El entorno político y los precios de las privatizaciones," Research Department Publications 4440, Inter-American Development Bank, Research Department.
    7. Loukas Spanos & Demetrios Papoulias, 2005. "Corporate Governance as an instrument of change state owned Corporate Governance as an instrument of change state owned companies: The case of the Hellenic Telecommunications Organization," Finance 0508004, University Library of Munich, Germany.
    8. Lina M. Cortés & John J. García & David Agudelo, 2015. "Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines," DOCUMENTOS DE TRABAJO CIEF 012453, UNIVERSIDAD EAFIT.
    9. Joan Calzada & Anton Costas, 2013. "“La liberalización de las telecomunicaciones en España: control de la inflación y universalización del servicio”," IREA Working Papers 201310, University of Barcelona, Research Institute of Applied Economics, revised May 2013.
    10. repec:bla:manchs:v:85:y:2017:i:4:p:491-510 is not listed on IDEAS
    11. Pau Castells & Francesc Trillas, 2008. "Political parties and the economy: Macro convergence, micro partisanship?," Working Papers 2008/1, Institut d'Economia de Barcelona (IEB).
    12. Pau Castells & Francesc Trillas, 2013. "The effects of surprise political events on quoted firms: the March 2004 election in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 83-112, March.
    13. Judith Clifton & Francisco Comín & Daniel Díaz-Fuentes, 2011. "From national monopoly to multinational corporation: How regulation shaped the road towards telecommunications internationalisation," Business History, Taylor & Francis Journals, vol. 53(5), pages 761-781, August.

    More about this item

    Keywords

    Corporate governance Privatization Regulation Deregulation Capture;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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