41 Pages Posted: 14 Aug 2005
Date Written: May 2007
We study the change in government control of privatized firms in OECD countries. Results indicate that governments typically transfer ownership rights without relinquishing proportional control. Control is commonly retained by leveraging state investments through pyramids, dual-class shares, and golden shares. Indeed, at the end of 2000, after the largest privatization wave in history, governments retain control of 62.4% of privatized firms. In civil law countries, governments tend to retain large ownership positions, whereas in common law countries they typically use golden shares. However, when we combine these two mechanisms, we find no association between a country's legal tradition and the extent of government control. Rather, we document more prevalent government influence over privatized firms in countries with proportional electoral rules and with a centralized system of political authority.
Keywords: Privatization, Corporate Governance
JEL Classification: L33, D72, G15, H6, K22
Suggested Citation: Suggested Citation
Bortolotti, Bernardo and Faccio, Mara, Government Control of Privatized Firms (May 2007). ECGI - Working Paper No. 40/2004; FEEM Working Paper No. 130.04; EFA 2005 Moscow Meetings Paper; AFA 2006 Boston Meetings Paper. Available at SSRN: https://ssrn.com/abstract=536683 or http://dx.doi.org/10.2139/ssrn.536683