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Government Control of Privatized Firms

41 Pages Posted: 14 Aug 2005  

Bernardo Bortolotti

Bocconi University; University of Turin

Mara Faccio

Purdue University - Krannert School of Management; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2007

Abstract

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

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

Bernardo Bortolotti (Contact Author)

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100
Italy

Mara Faccio

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http://www.ecgi.org

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

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1 Business Link
Singapore, 117592
Singapore

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