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Choice of ownership structure and firm performance : Evidence from Estonia

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  • Jones, Derek C.
  • Kalmi, Panu
  • Mygind, Niels

Abstract

In this paper we use rich panel data for a representative sample of Estonian enterprises to analyse diverse issues related to the determinants of ownership structures and ownership changes after privatisation.A key focus is to determine whether ownership changes are related to economic efficiency.While employee owned firms are found to be much more prone than other firms to switch ownership categories, often "employee owned" firms remain "insider-owned" as ownership passes from current employees to managers and former employees.Logit analyses of the determinants of ownership structures and ownership changes provides mixed support for several hypotheses.As predicted: (i) wealth and resource constraints play a crucial role in the determination of ownership, with foreigners buying firms with the highest equity levels and insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent ownership changes, especially away from employee ownership; (iii) allocation of ownership depends on the pre-privatisation origin and location of the firm, and these factors also influence subsequent ownership changes.Finally we compare our findings with those achieved by using more conventional approaches to analyze efficiency that use very similar data.Reassuringly the evidence presented in this paper is consistent with the view that efficiency considerations drive ownership changes (while earlier analysis for Estonia and for many other transition economies has identified the impact of ownership on economic performance.)However, the findings in this paper also establish that there are important influences besides economic efficiency that affect enterprise ownership and ownership changes.JEL-numbers: G3, J5, P2, P3 Key words: Privatisation, ownership change, employee ownership, transition economies, Estonia

Suggested Citation

  • Jones, Derek C. & Kalmi, Panu & Mygind, Niels, 2003. "Choice of ownership structure and firm performance : Evidence from Estonia," BOFIT Discussion Papers 7/2003, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2003_007
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    References listed on IDEAS

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    1. Jones, Derek C. & Mygind, Niels, 1999. "The Nature and Determinants of Ownership Changes after Privatization: Evidence from Estonia," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 422-441, September.
    2. Douglas L. Kruse, 1996. "Why Do Firms Adopt Profit-Sharing and Employee Ownership Plans?," British Journal of Industrial Relations, London School of Economics, vol. 34(4), pages 515-538, December.
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    Cited by:

    1. Grosfeld, Irena, 2009. "Large shareholders and firm value: Are high-tech firms different?," Economic Systems, Elsevier, vol. 33(3), pages 259-277, September.
    2. Curtiss, Jarmila & Ratinger, Tomáš & Medonos, Tomáš, 2012. "Ownership and Investment Behaviour in Transition Countries: A Case Study of Collective and Corporate Farms in the Czech Republic," Factor Markets Working Papers 121, Centre for European Policy Studies.
    3. Curtiss, Jarmila & Ratinger, Tomas & Medonos, Tomas, 2012. "Ownership and Investment Behaviour in Transition Countries: A Case Study of Collective and Corporate Farms in the Czech Republic," Working papers 122841, Factor Markets, Centre for European Policy Studies.
    4. Irena Grosfeld & Iraj Hashi, 2004. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," William Davidson Institute Working Papers Series 2004-718, William Davidson Institute at the University of Michigan.
    5. Hu, Zhining & Zheng, Jianghuai & Wang, Jialing, 2011. "Impact of industrial linkages on firm performance in development zones," MPRA Paper 33127, University Library of Munich, Germany.
    6. Irena Grosfeld, 2009. "Large shareholders and firm value: Are high-tech firms different?," Working Papers halshs-00587856, HAL.
    7. Curtiss, Jarmila & Medonos, Tomas & Ratinger, Tomas, 2005. "Ownership Form Effect on Large-Scale Farms' Performance: Case of Czech Agriculture," 94th Seminar, April 9-10, 2005, Ashford, UK 24435, European Association of Agricultural Economists.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions

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