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Ownership, Control and Corporate Performance after Large-Scale Privatization

  • Jan Hanousek

    (CERGE-EI)

  • Evzen Kocenda

    (CERGE-EI)

  • Jan Svejnar

    (University of Michigan)

We analyze the effects of ownership type and concentration on performance of a population of firms in a model large-scale privatization economy. Using specifications based on first-differences and unique instrumental variables, we find that few types of private ownership improve dynamic post-privatization performance. Concentrated foreign (but not domestic) ownership improves some measures of performance relative to state ownership. Foreign investors engage in strategic restructuring by increasing the rate of change of sales, while domestic private owners reduce the rate of change of labor cost without increasing profitability. The effects of concentrated foreign ownership support the agency theory and go against theories stressing the positive effects of managerial autonomy and initiative. Our results are also consistent with the thesis that large domestic stockholders are not improving performance because they loot the firms. We find some support for the hypothesis that firms restructure by first lowering and later increasing the rate of change of employment. The state as a holder of the golden share has a positive effect on employment, while stimulating profitable restructuring. The state hence appears as a more economically and socially helping agent than in some recent studies.

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Paper provided by EconWPA in its series Microeconomics with number 0406002.

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Length: 50 pages
Date of creation: 04 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpmi:0406002
Note: Type of Document - pdf; pages: 50
Contact details of provider: Web page: http://econwpa.repec.org

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