Ownership and Firm Performance after Large-Scale Privatization

Jan Svejnar and Evžen Kočenda

No 471a, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We analyze 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 ownership. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labor cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and evidence against 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 a version of the hypothesis that firms restructure by first lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring while pursuing an employment objective, which is understandable in a period of rising unemployment. Our results hence portray the state as a more economically and socially beneficial agent than do some other recent studies.

Keywords: ownership; performance; privatization; panel data; industrial organization (search for similar items in EconPapers)
JEL-codes: C33 D20 G32 G34 L20 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2003-02-01
New Economics Papers: this item is included in nep-com, nep-eff, nep-fin, nep-his, nep-lam and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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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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