National Culture and Privatization: The Relationship between Collectivism and Residual State Ownership
36 Pages Posted: 15 Nov 2012 Last revised: 11 Sep 2015
Date Written: September 11, 2015
Using a large hand-collected database of 605 privatized firms from 48 countries, we examine the relationship between the collectivism measure of culture and residual state ownership in privatized firms. We find that the continued role of government in privatized firms is positively related to collectivism. This result is robust to using alternative measures of collectivism and government control, as well as when we address the endogeneity of collectivism. Finally, we examine the economic outcomes of culture at the firm level, focusing primarily on performance, efficiency, risk taking, and valuation measures. We report that privatized firms with high residual state ownership exhibit lower performance, valuation, efficiency, and risk taking in collectivist societies. Our results suggest that formal institutions are not, as sustained by previous studies, the main/exclusive constraints on the privatization reform.
Keywords: Privatization; national culture; corporate governance; performance
JEL Classification: G32, G34
Suggested Citation: Suggested Citation