Growth and Growth Obstacles in Transition Economies: Privatized Versus De Novo Private Firms

44 Pages Posted: 11 May 2015

See all articles by Juliet D'Souza

Juliet D'Souza

Georgia Gwinnett College

William L. Megginson

University of Oklahoma

Barkat Ullah

Morgan State University

Zuobao Wei

University of Texas at El Paso

Date Written: July 24, 2014

Abstract

In this study, we employ the World Bank Enterprise Survey (WBES) data collected in 2002, 2005, and 2009 for 21,499 firms from 27 Eastern European and Central Asian countries to examine firm-level growth constraints faced by privatized firms versus those faced by the originally (de novo) private firms. We find that the de novo firms experience significantly higher financial, corruption, and legal obstacles than the privatized firms. We further document that, even though faced with more obstacles in the business environment, the de novo firms outperform the privatized firms. One explanation is that the profit motive of the de novo firms is organic, whereas the profit motive of the privatized firms is acquired. The organic profit motive may be powerful enough for the de novo firms to overcome more difficulties in the business environment and excel. Our study is the first in the privatization literature to go beyond performance comparisons and examine firm-level growth constraints.

Keywords: Privatization, Firm performance, Growth obstacle, Transition economy, World Bank Enterprise Survey

JEL Classification: G32, G38, L33

Suggested Citation

D'Souza, Juliet and Megginson, William L. and Ullah, Barkat and Wei, Zuobao, Growth and Growth Obstacles in Transition Economies: Privatized Versus De Novo Private Firms (July 24, 2014). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2604703

Juliet D'Souza

Georgia Gwinnett College ( email )

1000 University Center Lane
Lawrenceville, GA 30043
United States

William L. Megginson

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Barkat Ullah

Morgan State University ( email )

Baltimore, MD 21251
United States

Zuobao Wei (Contact Author)

University of Texas at El Paso ( email )

500 W. University Ave.
El Paso, TX 79968
United States
915-747-5381 (Phone)
915-747-6282 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
42
Abstract Views
333
PlumX Metrics