Government Control of Privatized Firms
Bocconi University; University of Turin
Purdue University - Krannert School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
ECGI - Working Paper No. 40/2004
FEEM Working Paper No. 130.04
EFA 2005 Moscow Meetings Paper
AFA 2006 Boston Meetings Paper
We study the change in government control of privatized firms in OECD countries. Results indicate that governments typically transfer ownership rights without relinquishing proportional control. Control is commonly retained by leveraging state investments through pyramids, dual-class shares, and golden shares. Indeed, at the end of 2000, after the largest privatization wave in history, governments retain control of 62.4% of privatized firms. In civil law countries, governments tend to retain large ownership positions, whereas in common law countries they typically use golden shares. However, when we combine these two mechanisms, we find no association between a country's legal tradition and the extent of government control. Rather, we document more prevalent government influence over privatized firms in countries with proportional electoral rules and with a centralized system of political authority.
Number of Pages in PDF File: 41
Keywords: Privatization, Corporate Governance
JEL Classification: L33, D72, G15, H6, K22
Date posted: August 14, 2005
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