Privatization Revisited: The Effects of Foreign and Domestic Owners on Corporate Performance
Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Czech National Bank (CNB); University of Michigan at Ann Arbor - The William Davidson Institute
University of Michigan - Stephen M. Ross School of Business; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)
CERGE-EI Discussion Paper 89
Privatization is often viewed as a necessary condition for improved corporate performance. We use a 1992-98 panel of the population of Czech industrial firms to assess the effect of mass privatization on corporate performance. Using numerous performance indicators, we find that foreign owners unambiguously improve long-term performance of the former state-owned enterprises. The results with respect to privatization to domestic owners are much less impressive. Our study provides strong support for the hypothesis that foreign investment improves corporate performance, but it provides very sobering evidence with respect to the hypothesis that privatization to domestic owners improves performance.
Keywords: corporate performance, Czech Republic, ownership, privatization, restructuring and transition
JEL Classification: D20, G30, P21, P31, P34working papers series
Date posted: October 10, 2002
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