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Choice of ownership structure and firm performance: Evidence from Estonia

  • Jones, Derek C.

    ()

    (BOFIT)

  • Kalmi, Panu

    ()

    (BOFIT)

  • Mygind, Niels

    ()

    (BOFIT)

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.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp0703.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 7/2003.

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Length: 43 pages
Date of creation: 27 May 2003
Date of revision:
Handle: RePEc:hhs:bofitp:2003_007
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
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Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Derek C. Jones & Panu Kalmi & Niels Mygind, 2003. "Choice of Ownership Structure and Firm Performance: Evidence from Estonia," William Davidson Institute Working Papers Series 2003-560, William Davidson Institute at the University of Michigan.
  2. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
  3. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  4. Miyazaki, Hajime, 1984. "On Success and Dissolution of the Labor-Managed Firm in the Capitalist Economy," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 909-31, October.
  5. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October.
  6. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
  7. Derek C. Jones & Niels Mygind, 2001. "Ownership and Productive Efficiency: Evidence from Estonia," William Davidson Institute Working Papers Series 385, William Davidson Institute at the University of Michigan.
  8. Ben-Ner, Avner & Jun, Byoung, 1996. "Employee Buyout in a Bargaining Game with Asymmetric Information," American Economic Review, American Economic Association, vol. 86(3), pages 502-23, June.
  9. Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
  10. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
  11. Ben-ner, Avner, 1988. "The life cycle of worker-owned firms in market economies : A theoretical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 10(3), pages 287-313, October.
  12. Estrin, Saul & Wright, Mike, 1999. "Corporate Governance in the Former Soviet Union," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 395-397, September.
  13. Igor Filatotchev & Mike Wright & Michael Bleaney, 1999. "Privatization, insider control and managerial entrenchment in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 481-504, July.
  14. Maxim Boycko & Andrei Shleifer & Robert W. Vishny, 1993. "Privatizing Russia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 139-192.
  15. Estrin, Saul & Wright, Mike, 1999. "Corporate Governance in the Former Soviet Union: An Overview," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 398-421, September.
  16. Randall K. Filer & Jan Hanousek, 2001. "Data Watch: Research Data from Transition Economies," William Davidson Institute Working Papers Series 416, William Davidson Institute at the University of Michigan.
  17. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  18. 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.
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