IDEAS home Printed from https://ideas.repec.org/p/ost/wpaper/291.html
   My bibliography  Save this paper

Divide and Privatize : Firms Break-up and Performance

Author

Listed:
  • Evžen Kočenda

    (Osteuropa-Institut, Regensburg (Institut for East European Studies))

  • Jan Hanousek

Abstract

We analyze the long-term effects of divesture and ownership change on corporate per-formance. We employ a unique data set for a large number of Czech firms spanning the period 1996–2005. We employ a propensity score matching procedure to deal with endogeneity problems. Our results, which are generally in line with the positive effects of divestiture found in the developed-market literature, show that the initial effects of di-vestiture are positive but after a certain point they quickly diminish over time.

Suggested Citation

  • Evžen Kočenda & Jan Hanousek, 2010. "Divide and Privatize : Firms Break-up and Performance," Working Papers 291, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
  • Handle: RePEc:ost:wpaper:291
    as

    Download full text from publisher

    File URL: http://www.oei-dokumente.de/publikationen/wp/wp-291.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Slade, Margaret E, 1998. "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?," Economic Journal, Royal Economic Society, vol. 108(448), pages 565-602, May.
    2. D'Souza, Juliet & Megginson, William & Nash, Robert, 2007. "The effects of changes in corporate governance and restructurings on operating performance: Evidence from privatizations," Global Finance Journal, Elsevier, vol. 18(2), pages 157-184.
    3. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
    4. Jan Hanousek & Libor Nemecek, 2001. "Czech parallel capital markets: discrepancies and inefficiencies," Applied Financial Economics, Taylor & Francis Journals, vol. 11(1), pages 45-55.
    5. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
    6. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2004. "Spinoffs, Privatization and Corporate Performance in Emerging Markets," Microeconomics 0406003, University Library of Munich, Germany.
    7. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, December.
    8. Jan Hanousek & Evžen Kočenda & Jan Svejnar, 2007. "Origin and concentration," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 1-31, January.
    9. Ann P. Bartel & Ann E. Harrison, 2005. "Ownership Versus Environment: Disentangling the Sources of Public-Sector Inefficiency," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 135-147, February.
    10. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
    11. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    12. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter.
    13. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    14. Evžen Kočenda, 1999. "Residual State Property in the Czech Republic," Eastern European Economics, Taylor & Francis Journals, vol. 37(5), pages 6-35, October.
    15. Lizal, Lubomir & Singer, Miroslav & Svejnar, Jan, 1997. "Enterprise Break-ups and Performance During the Transition," CEPR Discussion Papers 1757, C.E.P.R. Discussion Papers.
    16. Roland, Gerard, 1994. "On the Speed and Sequencing of Privatisation and Restructuring," Economic Journal, Royal Economic Society, vol. 104(426), pages 1158-1168, September.
    17. Philippe Aghion & Olivier Jean Blanchard & Wendy Carlin, 1997. "The Economics of Enterprise Restructuring in Central and Eastern Europe," International Economic Association Series, in: John E. Roemer (ed.), Property Relations, Incentives and Welfare, chapter 11, pages 271-325, Palgrave Macmillan.
    18. Jan Hanousek & Evžen Kočenda & Jan Svejnar, 2009. "Divestitures, privatization and corporate performance in emerging markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 43-73, January.
    19. Donald D. Bergh & Michael W. Lawless, 1998. "Portfolio Restructuring and Limits to Hierarchical Governance: The Effects of Environmental Uncertainty and Diversification Strategy," Organization Science, INFORMS, vol. 9(1), pages 87-102, February.
    20. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
    21. Lubomir Lizal & Miroslav Singer & Jan Svejnar, 2001. "Enterprise Breakups And Performance During The Transition From Plan To Market," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 92-99, February.
    22. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W., 1994. "Voucher privatization," Journal of Financial Economics, Elsevier, vol. 35(2), pages 249-266, April.
      • Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W., 1993. "Voucher Privatization," Working Papers 85, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    23. Polona Domadenik & Lubomír Lízal & Marko Pahor, 2012. "The Effect of Enterprise Break-Ups on Performance. The Case of the Former Yugoslav Republic of Macedonia," Revue économique, Presses de Sciences-Po, vol. 63(5), pages 849-866.
    24. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 01 Feb 2018.
    25. Stepan Jurajda & Juraj Stancik, 2012. "Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 306-324, August.
    26. Polona Domadenik & Janez Prašnikar & Jan Svejnar, 2008. "Restructuring of firms in transition: ownership, institutions and openness to trade," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(4), pages 725-746, June.
    27. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    28. Myeong-Hyeon Cho & Mark A. Cohen, 1997. "The economic causes and consequences of corporate divestiture," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 367-374.
    29. Oecd, 2003. "Former Yugoslav Republic of Macedonia," Sigma Public Management Profiles 11, OECD Publishing.
    30. Shleifer, Andrei & Treisman, Daniel, 2005. "A Normal Country: Russia After Communism," Scholarly Articles 33078568, Harvard University Department of Economics.
    31. Schipper, Katherine & Smith, Abbie, 1983. "Effects of recontracting on shareholder wealth : The case of voluntary spin-offs," Journal of Financial Economics, Elsevier, vol. 12(4), pages 437-467, December.
    32. Mona V. Makhija, 2004. "The value of restructuring in emerging economies: the case of the Czech Republic," Strategic Management Journal, Wiley Blackwell, vol. 25(3), pages 243-267, March.
    33. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1994. "Voucher Privatization," Scholarly Articles 30704159, Harvard University Department of Economics.
    34. Andrei Shleifer & Daniel Treisman, 2005. "A Normal Country: Russia After Communism," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 151-174, Winter.
    35. Shin, G. Hwan, 2008. "The profitability of asset sales as an explanation of asset divestitures," Pacific-Basin Finance Journal, Elsevier, vol. 16(5), pages 555-571, November.
    36. Jan Hanousek & Evžen Kočenda, 2008. "Potential of the state to control privatized firms," Economic Change and Restructuring, Springer, vol. 41(2), pages 167-186, June.
    37. Moschieri, Caterina & Mair, Johanna, 2008. "Research on corporate divestitures: A synthesis," Journal of Management & Organization, Cambridge University Press, vol. 14(4), pages 399-422, September.
    38. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    39. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.
    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. Ichiro Iwasaki & Evžen Kočenda & Yoshisada Shida, 2022. "Institutions, financial development, and small business survival: evidence from European emerging markets," Small Business Economics, Springer, vol. 58(3), pages 1261-1283, March.
    2. Iwasaki, Ichiro & Kočenda, Evžen, 2017. "Are some owners better than others in Czech privatized firms? Even meta-analysis can’t make us perfectly sure," Economic Systems, Elsevier, vol. 41(4), pages 537-568.
    3. Baumöhl, Eduard & Iwasaki, Ichiro & Kočenda, Evžen, 2019. "Institutions and determinants of firm survival in European emerging markets," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 431-453.
    4. Koráb, Petr & Saadaoui Mallek, Ray & Dibooglu, Sel, 2021. "Effects of quantitative easing on firm performance in the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    5. Richard Frensch & Achim Schmillen, 2013. "The Penn Effect and Transition: The New EU Member States in International Perspective," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(1), pages 99-119, March.
    6. Baumöhl, Eduard & Iwasaki, Ichiro & Kočenda, Evžen, 2020. "Firm survival in new EU member states," Economic Systems, Elsevier, vol. 44(1).
    7. Baghdasaryan, Delia & la Cour, Lisbeth, 2013. "Competition, ownership and productivity. A panel analysis of Czech firms," Journal of Economics and Business, Elsevier, vol. 69(C), pages 86-100.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evžen Kočenda & Jan Hanousek, 2011. "Vliv rozdělení českých podniků na ziskovost a produktivitu [Effect of the Czech Firms Break-Up on their Profitability and Productivity]," Politická ekonomie, Prague University of Economics and Business, vol. 2011(5), pages 579-598.
    2. Iwasaki, Ichiro & Kočenda, Evžen, 2017. "Are some owners better than others in Czech privatized firms? Even meta-analysis can’t make us perfectly sure," Economic Systems, Elsevier, vol. 41(4), pages 537-568.
    3. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.
    4. Jan Hanousek & Evžen Kočenda & Jan Svejnar, 2009. "Divestitures, privatization and corporate performance in emerging markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 43-73, January.
    5. Ichiro IWASAKI & Satoshi MIZOBATA, 2018. "Post-Privatization Ownership And Firm Performance: A Large Meta-Analysis Of The Transition Literature," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(2), pages 263-322, June.
    6. Baghdasaryan, Delia & la Cour, Lisbeth, 2013. "Competition, ownership and productivity. A panel analysis of Czech firms," Journal of Economics and Business, Elsevier, vol. 69(C), pages 86-100.
    7. J. David Brown & John S. Earle & Solomiya Shpak & Volodymyr Vakhitov, 2019. "Is Privatization Working in Ukraine?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 1-35, March.
    8. Stepan Jurajda & Juraj Stancik, 2012. "Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 306-324, August.
    9. Hanousek, Jan & Kočenda, Evžen & Mašika, Michal, 2012. "Firm efficiency: Domestic owners, coalitions, and FDI," Economic Systems, Elsevier, vol. 36(4), pages 471-486.
    10. Thorsten Beck & Luc Laeven, 2006. "Institution building and growth in transition economies," Journal of Economic Growth, Springer, vol. 11(2), pages 157-186, June.
    11. Ádám Szentpéteri & Álmos Telegdy, 2010. "Political Selection Of Firms Into Privatization Programs. Evidence From Romanian Comprehensive Data," Economics and Politics, Wiley Blackwell, vol. 22(3), pages 298-328, November.
    12. Laura Cabeza García & Silvia Gómez Ansón, 2012. "What Drives the Operating Performance of Privatised Firms?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 1-27, February.
    13. Schuster, Philipp & Schmitt, Carina & Traub, Stefan, 2013. "The retreat of the state from entrepreneurial activities: A convergence analysis for OECD countries, 1980–2007," European Journal of Political Economy, Elsevier, vol. 32(C), pages 95-112.
    14. Iwasaki, Ichiro & Kočenda, Evžen & Shida, Yoshisada, 2021. "Distressed acquisitions: Evidence from European emerging markets," Journal of Comparative Economics, Elsevier, vol. 49(4), pages 962-990.
    15. Jan Hanousek & Evžen Kočenda & Jan Švejnar, 2006. "Rozdělení, privatizace podniků a jejich výkonnost [Breakups, privatization and firms" performance]," Politická ekonomie, Prague University of Economics and Business, vol. 2006(4), pages 467-489.
    16. Wendong Shi & Jingwei Sun, 2016. "The impact of privatization on efficiency and profitability," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(3), pages 393-420, July.
    17. Ekaterina Zhuravskaya, 2007. "Whither Russia? A Review of Andrei Shleifer's A Normal Country," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 127-146, March.
    18. Kornai, János, 2004. "Mit tanulhatnak a posztszocialista átalakulás útjára lépő országok az átmenet eddigi tapasztalataiból? [What can countries embarking on post-socialist transformation learn from the experiences so f," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 899-923.
    19. Cabeza-García, Laura & Gómez-Ansón, Silvia, 2011. "Post-privatisation ownership concentration: Determinants and influence on firm efficiency," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 412-430, September.
    20. Richard Disney & Eleonora Fischera & Trudy Owens, 2010. "Has the Introduction of Microfinance Crowded-out Informal Loans in Malawi?," Discussion Papers 10/08, University of Nottingham, CREDIT.

    More about this item

    Keywords

    firm divestiture; corporate performance; ownership changes; privatization; emerging markets; endogeneity; propensity score matching procedure;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • 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
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • P47 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Performance and Prospects

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ost:wpaper:291. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kseniia Gatskova (email available below). General contact details of provider: https://edirc.repec.org/data/osteide.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.