Endogenous Ownership Structure: Factors Affecting the Post-Privatisation Equity in Largest Hungarian Firms

Acta Oeconomica, Vol. 52, No. 4, pp. 443-471, 2002

FEEM Working Paper No. 78.2002

41 Pages Posted: 4 Jun 2003 Last revised: 5 Sep 2010

Kate Bishop

University College London, SSEES

Igor Filatotchev

City University London - Sir John Cass Business School

Tomasz Mickiewicz

Aston University - Aston Business School

Date Written: September 1, 2002

Abstract

Using a data set for 162 largest Hungarian firms during the period of 1994-1999 this paper explores the determinants of equity shares held by both foreign investors and by Hungarian corporations. We find evidence of a post-privatisation evolution towards more homogeneous equity structures, where dominant categories of owners aim at achieving controlling stakes. Here, the foreign investors and Hungarian corporations play the major role. In addition, focusing on firm level characteristics we find that the exporting firms attract foreign owners, who acquire controlling equity stakes. Similarly, the firm size measurements are positively associated with the presence of foreign investors. However, they are negatively associated with 100% foreign ownership, possibly because the marginal costs of acquiring additional equity are growing with the size of the assets. We interpret the results in light of the existing theory. In particular, following Demsetz and Lehn (1985) and Demsetz and Villalonga (2001) we argue that equity should not be treated as an exogenous variable. As for specific determinants of equity levels, we focus on informational asymmetries and (unobserved) ownership specific characteristics of foreign investors and Hungarian investors.

Keywords: Ownership Structure, Corporate Control, Foreign Investors, Privatisation

JEL Classification: G32, G34, P31

Suggested Citation

Bishop, Kate and Filatotchev , Igor and Mickiewicz, Tomasz, Endogenous Ownership Structure: Factors Affecting the Post-Privatisation Equity in Largest Hungarian Firms (September 1, 2002). Acta Oeconomica, Vol. 52, No. 4, pp. 443-471, 2002; FEEM Working Paper No. 78.2002. Available at SSRN: https://ssrn.com/abstract=294433 or http://dx.doi.org/10.2139/ssrn.294433

Kate Bishop

University College London, SSEES ( email )

Malet Street
Senate House
London WC1E 7HU
United Kingdom
+44 20 7862 8518 (Phone)
+44 20 7862 8542 (Fax)

Igor Filatotchev

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tomasz Marek Mickiewicz (Contact Author)

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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