IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpma/0305008.html
   My bibliography  Save this paper

Choice of ownership structure and firm performance: Evidence from Estonia

Author

Listed:
  • Derek C. Jones

    (Hamilton College, Clinton, NY 13323, Dept. of Economics)

  • Panu Kalmi

    (Helsinki School of Economics, department of economics)

  • Niels Mygind

    (Center for East European Studies, Copenhagen Business School)

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.

Suggested Citation

  • Derek C. Jones & Panu Kalmi & Niels Mygind, 2003. "Choice of ownership structure and firm performance: Evidence from Estonia," Macroeconomics 0305008, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0305008
    Note: Type of Document - pdf; prepared on IBM PC; to print on HP/PostScript/Franciscan monk; pages: 43 ; figures: included
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0305/0305008.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. 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.
    3. 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.
    4. Kari Liuhto, 1995. "Foreign investment in Estonia: A statistical approach," Europe-Asia Studies, Taylor & Francis Journals, vol. 47(3), pages 507-525.
    5. Derek C. Jones & Niels Mygind, 2002. "Ownership and Productive Efficiency: Evidence from Estonia," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 284-301, June.
    6. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    7. Chris Doucouliagos, 1995. "Worker Participation and Productivity in Labor-Managed and Participatory Capitalist Firms: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
    8. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    9. 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.
    10. 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.
    11. 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 502-523, June.
    12. 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 1155-1177, December.
    13. Dow,Gregory K., 2003. "Governing the Firm," Cambridge Books, Cambridge University Press, number 9780521818537.
    14. 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 909-931, October.
    15. Philippe Aghion & Olivier J. Blanchard, 1998. "On privatization methods in Eastern Europe and their implications1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 87-99, May.
    16. 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.
    17. Derek C Jones & Niels Mygind, 2000. "Privatization and Enterprise Performance: Evidence from Estonia," Palgrave Macmillan Books, in: Vojmir Franičević & Milica Uvalić (ed.), Equality, Participation, Transition, chapter 10, pages 162-183, Palgrave Macmillan.
    18. Estrin, Saul & Wright, Mike, 1999. "Corporate Governance in the Former Soviet Union," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 395-397, September.
    19. 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.
    20. 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.
    21. Derek C. Jones & Takao Kato, 1993. "The Scope, Nature, and Effects of Employee Stock Ownership Plans in Japan," ILR Review, Cornell University, ILR School, vol. 46(2), pages 352-367, January.
    22. Bowles,Samuel & Gintis,Herbert & Gustafsson,Bo (ed.), 1993. "Markets and Democracy," Cambridge Books, Cambridge University Press, number 9780521432238, September.
    23. 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.
    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. Irena Grosfeld & Iraj Hashi, 2007. "Changes in Ownership Concentration in Mass Privatised Firms: evidence from Poland and the Czech Republic," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(4), pages 520-534, July.
    2. Gianni De Fraja & Barbara M. Roberts, 2009. "Privatization in Poland What was the government trying to achieve?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 531-557, July.
    3. Grosfeld, Irena, 2009. "Large shareholders and firm value: Are high-tech firms different?," Economic Systems, Elsevier, vol. 33(3), pages 259-277, September.
    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. Zhining Hu & Jianghuai Zheng & Jialing Wang, 2011. "Impact of Industrial Linkages on Firm Performance in Development Zones," Chinese Economy, Taylor & Francis Journals, vol. 44(2), pages 78-105, March.
    6. 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.
    7. Derek C. Jones & Panu Kalmi, 2009. "Trust, Inequality And The Size Of The Co‐Operative Sector: Cross‐Country Evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(2), pages 165-195, June.
    8. Bernd Gorzig & Martin Gornig & Ramona Voshage & Axel Werwatz, 2010. "Eastern Germany on the brink of closing the productivity gap? Firm level evidence from manufacturing," Post-Communist Economies, Taylor & Francis Journals, vol. 22(4), pages 499-511.
    9. 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.

    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. Derek Jones & Panu Kalmi & Niels Mygind, 2005. "Choice of Ownership Structure and Firm Performance: Evidence from Estonia," Post-Communist Economies, Taylor & Francis Journals, vol. 17(1), pages 83-107.
    2. repec:zbw:bofitp:2003_007 is not listed on IDEAS
    3. Dow,Gregory K., 2019. "The Labor-Managed Firm," Cambridge Books, Cambridge University Press, number 9781107589650.
    4. Zorica Kalezić, 2015. "Ownership Concentration and Firm Performance in Transition Economies: Evidence from Montenegro," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 4(3), pages 5-64.
    5. Tortia, Ermanno C., 2021. "Employment protection regimes and dismissal of members in worker cooperatives," MPRA Paper 109214, University Library of Munich, Germany.
    6. Chong-En Bai & Chenggang Xu, 2001. "Ownership, Incentives and Monitoring," STICERD - Theoretical Economics Paper Series 413, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    7. Gregory Dow, 2001. "Allocating Control over Firms: Stock Markets versus Membership Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(2), pages 201-218, March.
    8. Irena Grosfeld & Iraj Hashi, 2001. "The Evolution of Ownership Structure in Firms Privatized through Wholesale Schemes in the Czech Republic and Poland," CASE Network Reports 0049, CASE-Center for Social and Economic Research.
    9. Bersant Hobdari, 2008. "Insider Ownership and Capital Constraints: An Empirical Investigation of the Credit Rationing Hypothesis in Estonia," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(6), pages 536-549, November.
    10. Sprenger, Carsten, 2011. "The choice of ownership structure: Evidence from Russian mass privatization," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 260-277, June.
    11. Gary Gorton & Frank Schmid, 2000. "Class Struggle Inside the Firm: A Study of German Codetermination," NBER Working Papers 7945, National Bureau of Economic Research, Inc.
    12. 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.
    13. Hueth, Brent & Marcoul, Philippe, 2007. "The Cooperative Firm as Monitored Credit," Staff Paper Series 508, University of Wisconsin, Agricultural and Applied Economics.
    14. Guillermo Alves & Gabriel Burdin & Paula Carrasco & Andrés Dean & Andrés Rius, 2012. "Empleo, remuneraciones e inversión en cooperativas de trabajadores y empresas convencionales: nueva evidencia para Uruguay," Documentos de Trabajo (working papers) 12-14, Instituto de Economía - IECON.
    15. Schnytzer, Adi & Andreyeva, Tatiana, 2002. "Company performance in Ukraine: is this a market economy?," Economic Systems, Elsevier, vol. 26(2), pages 83-98, June.
    16. Trojanowski, Grzegorz, 2008. "Equity block transfers in transition economies: Evidence from Poland," Economic Systems, Elsevier, vol. 32(3), pages 217-238, September.
    17. Philip Mellizo & Jeffrey Carpenter & Peter Hans Matthews, 2017. "Ceding control: an experimental analysis of participatory management," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(1), pages 62-74, July.
    18. Sinani, Evis & Meyer, Klaus E., 2004. "Spillovers of technology transfer from FDI: the case of Estonia," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 445-466, September.
    19. Filatotchev, Igor & Wright, Mike & Uhlenbruck, Klaus & Tihanyi, Laszlo & Hoskisson, Robert E., 2003. "Governance, organizational capabilities, and restructuring in transition economies," Journal of World Business, Elsevier, vol. 38(4), pages 331-347, November.
    20. Kranz, Olaf & Steger, Thomas, 2016. "Resurrected, recovered, but still didn’t survive? A case study on the viability of employee-owned companies," management revue. Socio-economic Studies, Rainer Hampp Verlag, vol. 27(4), pages 234-260.
    21. Louis Putterman, 2006. "Labor-Managed Firms," Working Papers 2006-18, Brown University, Department of Economics.

    More about this item

    Keywords

    Privatisation; ownership change; employee ownership; transition economies; Estonia;
    All these keywords.

    JEL classification:

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

    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:wpa:wuwpma:0305008. 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: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    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.