Corporatization and Firm Performance: Evidence from Publicly-Provided Local Utilities

Cambini Carlo, Massimo Filippini, Massimiliano Piacenza and Davide Vannoni
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Cambini Carlo: Politecnico di Torino and HERMES-Italy

Review of Law & Economics, 2011, vol. 7, issue 1, 191-213

Abstract: This study investigates the effects of the corporatization process – i.e., the transformation of a municipal firm into a limited liability company – on the production costs of local public services whose ownership is maintained by the local government. Theoretical analysis predicts that, even without privatization, corporatization is a potentially effective way to improve efficiency (Shleifer and Vishny, 1994; Stiglitz, 2000). We explore this issue by using information on a typical local utility, such as the bus service provided by public transit systems in Italy, which experienced a reform of the governance towards the corporatization structure during the ’90s. The results on a sample of 33 local bus companies over the period 1993-2002 show that, even if public ownership persists, the transformation of a municipal enterprise into an autonomous company – corresponding to the first stage of the corporatization of local utilities in Italy – or into a limited liability company exerts a reducing impact on production costs.

Date: 2011
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DOI: 10.2202/1555-5879.1428

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