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Endogenous ownership structure: factors affecting the post-privatisation equity in largest Hungarian firms

  • Kate Bishop

    ()

    (UCL School of Slavonic and East European Studies)

  • Igor Filatotchev

    ()

    (School of Management and Organisational Psychology, Birkbeck College)

  • Tomasz Mickiewicz

    ()

    (UCL School of Slavonic and East European Studies)

Using a data set for 162 largest Hungarian firms during the period of 1994-1999 this paper explores the determinants of equity shares held by foreign investors and by Hungarian institutional investors.. We find evidence of a post-privatisation evolution towards more homogeneus equity structures, where dominant categories of owners aim at achieving controlling stakes. Here, the foreign investors and Hungarian institutional investors play the major role. In addition, focusing on firm level characteristics we find that the exporting firms attract foreign owners, who acquire controlling equity stakes. Similarly, the firm size measurements are positively associated with the presence of foreign investors. However, they negatively associated with 100% foreign ownership, since the marginal costs of acquiring additional equity are growing with the size of the assets. We interpret the results in light of the existing theory. In particular, following Demsetz and Lehn (1985) and Demsetz and Villalonga (2001) we argue that equity should not be treated as an exogenous variable. As for specific determinants of equity levels, we focus on informational asymmetries and (unobserved) ownership specific characteristics of foreign investors and Hungarian investors.

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Paper provided by UCL School of Slavonic and East European Studies (SSEES) in its series UCL SSEES Economics and Business working paper series with number 5.

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Date of creation: Jan 2002
Publication status: Published in Acta Oeconomica 52 (4) pp. 443-471. 10.1556/AOecon.52.2002.4.3
Handle: RePEc:see:wpaper:5
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