National culture and privatization: The relationship between collectivism and residual state ownership

Narjess Boubakri, Omrane Guedhami, Chuck C Y Kwok and Walid Saffar
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Narjess Boubakri: School of Business Administration, American University of Sharjah, Sharjah, UAE
Omrane Guedhami: Moore School of Business, University of South Carolina, Columbia, USA
Chuck C Y Kwok: Moore School of Business, University of South Carolina, Columbia, USA
Walid Saffar: School of Accounting and Finance, The Hong Kong Polytechnic University, Hong Hum, Kowloon, Hong Kong

Journal of International Business Studies, 2016, vol. 47, issue 2, 170-190

Abstract: Using a large hand-collected database of 605 privatized firms from 48 countries, we examine the relationship between the collectivism measure of culture and residual state ownership in privatized firms. We find that the continued role of government in privatized firms is positively related to collectivism. This result is robust to using alternative measures of collectivism and government control, as well as when we address the endogeneity of collectivism. Finally, we examine the economic outcomes of culture at the firm level, focusing primarily on performance, efficiency, risk-taking, and valuation measures. We report that privatized firms with high residual state ownership exhibit lower performance, valuation, efficiency, and risk-taking in collectivist societies. Our results suggest that formal institutions are not, as sustained by previous studies, the main/exclusive constraints on the privatization reform.

Date: 2016
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