When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies

Posted: 9 Dec 1999

See all articles by Roman Frydman

Roman Frydman

New York University (NYU) - Department of Economics

Cheryl W. Gray

World Bank

Marek P. Hessel

Fordham University - Gabelli School of Business

Andrzej Rapaczynski

Columbia Law School

Abstract

This paper compares the performance of privatized and state firms in the transition economies of Central Europe, while controlling for various forms of selection bias. It argues that privatization has different effects depending on the types of owners to whom it gives control. In particular, privatization to outsider, but not insider, owners has significant performance effects. Where privatization is effective, the effect on revenue performance is very pronounced, but there is no comparable effect on cost reduction. Overlooking the strong revenue effect of privatization to outsider owners leads to a substantial overstatement of potential employment losses from post-privatization restructuring.

Suggested Citation

Frydman, Roman and Gray, Cheryl W. and Hessel, Marek P. and Rapaczynski, Andrzej, When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies. Quarterly Journal of Economics, Vol. 114, pp. 1153-1191, November 1999 . Available at SSRN: https://ssrn.com/abstract=199948

Roman Frydman (Contact Author)

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Cheryl W. Gray

World Bank ( email )

1818 H Street
Washington, DC 20433
United States
202-473-9188 (Phone)
202-522-1155 (Fax)

Marek P. Hessel

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

Andrzej Rapaczynski

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States
(212) 854-3421 (Phone)
(212) 854-7946 (Fax)

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