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Government Control of Privatized Firms

Bernardo Bortolotti

Bocconi University; University of Turin

Mara Faccio

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

May 2007

ECGI - Working Paper No. 40/2004
FEEM Working Paper No. 130.04
EFA 2005 Moscow Meetings Paper
AFA 2006 Boston Meetings Paper

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.

Number of Pages in PDF File: 41

Keywords: Privatization, Corporate Governance

JEL Classification: L33, D72, G15, H6, K22

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Date posted: August 14, 2005  

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

Contact Information

Bernardo Bortolotti (Contact Author)
Bocconi University ( email )
Via Sarfatti 25
Milan, MI 20136
University of Turin
Via Po 53
Torino, Turin - Piedmont 10100
Mara Faccio
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
European Corporate Governance Institute (ECGI)
B-1050 Brussels
HOME PAGE: http://www.ecgi.org
National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )
BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
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