Ownership and Performance after Large-Scale Privatization

46 Pages Posted: 3 Jun 2003

See all articles by Evžen Kočenda

Evžen Kočenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

We analyze the effect of ownership on post-privatization performance in a virtually complete population od medium and large firms privatized in a model large-scale privatization economy (Czech Republic). We find that concentrated foreign ownership improves economic performance, but domestic private ownership does not, relative to state ownership. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labor cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and evidence against theories stressing the positive effects of managerial autonomy and initiative. Our results are also consistent with the thesis that the presence of a large domestic stockholder may not result in a superior performance if this shareholder "loots" the firm. We find support for a version of the hypothesis that firms restructure by first lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring while pursuing an employment objective, which is understandable in period of rising unemployment. Our results hence portray the state as a more economically and socially beneficial agent than do some other recent studies.

Keywords: ownership, performance, privatization, panel data, industrial organization

JEL Classification: C33, D20, G32, G34, L20

Suggested Citation

Kocenda, Evzen and Svejnar, Jan, Ownership and Performance after Large-Scale Privatization (January 2003). Available at SSRN: https://ssrn.com/abstract=401620 or http://dx.doi.org/10.2139/ssrn.401620

Evzen Kocenda (Contact Author)

Charles University in Prague - Institute of Economic Studies ( email )

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Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

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CESifo

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Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

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