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The Impact of Privatisation on the Performance of Medium and Large Industrial Enterprises

  • Dobrodey Vladimir
  • Gimadi Ilya

    ()

  • Perevalov Yuri

The study, based on panel data from 198 industrial enterprises in the Sverdlovsk Oblast during 1992-1996, provides empirical evidence on the impact of privatisation upon the performance of medium, large and extra-large industrial enterprises. The study shows that privatisation "on average" produces performance improvements only in operating profit margin and, to some extent, in the productivity of labour. We revealed that methods (options) of privatisation had not only a positive but also a negative impact on the performance of enterprises. The state seems to be a passive shareholder. However, our results suggest that not only full privatisation but also majority state ownership is preferable to a state minority stakeholding, possibly because of the absence of a monitoring shareholder in the latter case with which to prevent managers achieving their own objectives at the expense of other shareholders. That is why the state should keep majority control over privatised enterprises or diminish its stake below 5% in order to avoid the negative drop in performance results caused by the absence of a monitoring shareholder.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 2k/01e.

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Length: 84 pages
Date of creation: 05 Apr 2001
Date of revision:
Handle: RePEc:eer:wpalle:2k/01e
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  1. Nellis, J., 1999. "Time to Rethink Privatization in Transition Economies?," Papers 38, World Bank - International Finance Corporation.
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  7. Caves, Douglas W & Christensen, Laurits R, 1980. "The Relative Efficiency of Public and Private Firms in a Competitive Environment: The Case of Canadian Railroads," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 958-76, October.
  8. 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 403-52, June.
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  10. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, March.
  11. Kole, Stacey R & Mulherin, J Harold, 1997. "The Government as a Shareholder: A Case from the United States," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 1-22, April.
  12. Jain, Bharat A & Kini, Omesh, 1994. " The Post-Issue Operating Performance of IPO Firms," Journal of Finance, American Finance Association, vol. 49(5), pages 1699-1726, December.
  13. Eckel, Catherine & Eckel, Doug & Singal, Vijay, 1997. "Privatization and efficiency: Industry effects of the sale of British Airways," Journal of Financial Economics, Elsevier, vol. 43(2), pages 275-298, February.
  14. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, December.
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