Ownership and Firm Performance After Large-Scale Privatization

Jan Svejnar and KoÄ enda, Evžen
Authors registered in the RePEc Author Service: Evžen Kočenda

No 4143, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse the effect of ownership on post-privatization performance in a virtually complete population of medium and large firms privatized in a model large-scale privatization economy (Czech Republic). We find that concentrated foreign ownership improves economic performance, but domestic private ownership does not, relative to state-owned firms. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labour cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and contradicting theories stressing the positive effects of managerial autonomy and initiative. Our results are also consistent with the thesis that the presence of a large domestic stockholder may not result in a superior performance if this shareholder ‘loots’ the firm. We find support for the hypothesis that firms restructure by lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring, while pursuing a socially understandable employment objective in a period of rising unemployment. Our results hence depict the state in transition economies as a much more economically and socially beneficial agent that many recent theoretical studies.

Keywords: Performance; Panel data; Industrial organization; Ownership; Privatization (search for similar items in EconPapers)
JEL-codes: C33 D20 G32 G34 L20 (search for similar items in EconPapers)
Date: 2003-12
New Economics Papers: this item is included in nep-cfn, nep-com, nep-mfd and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Ownership and Firm Performance after Large-Scale Privatization (2003)
Working Paper: Ownership and Firm Performance after Large-Scale Privatization (2003)
Working Paper: The Effects of Ownership Forms and Concentration on Firm Performance after Large-Scale Privatization (2002)
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