Determinants of Foreign Ownership in Newly Privatized Companies in Transition Economies

Christopher W Anderson, Tomas Jandik and Anil K Makhija

The Financial Review, 2001, vol. 36, issue 2, 161-75

Abstract: We investigate determinants of foreign ownership in newly privatized firms. We analyze data on privatized Czech firms to address two related general questions. First, what characteristics distinguish transition firms that attract a foreign investor? Second, how do firm-specific characteristics influence the size of the foreign equity stake? Our results suggest that foreign investors i) seek safe, profitable firms in which they can exert unchallenged influence on corporate governance and then ii) structure their equity stakes to mitigate agency costs and political risk. Copyright 2001 by MIT Press.

Date: 2001
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