The Emergence of Large Shareholders in Mass Privatized Firms: Evidence from Poland and the Czech Republic

35 Pages Posted: 14 Sep 2004

See all articles by Irena Grosfeld

Irena Grosfeld

Paris School of Economics

Iraj Hashi

Staffordshire University Business School; CASE - Center for Social and Economic Research

Date Written: October 2004

Abstract

Mass privatization offers a particularly suitable framework to study the change in ownership concentration as the extent of change is unusual for a stable market economy. Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we find that despite important differences in the design of the two programmes and despite different quality of legal and regulatory framework, ownership structure in the two countries has rapidly evolved and the emerging ownership patterns are remarkably similar. This suggests that private benefits of control are large and the quality of investor protection regime is low in both countries. However, looking at the relationship between the change in ownership concentration and firm performance, we find an interesting difference between the two countries: in the Czech Republic the increase in ownership concentration seems to be less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This effect may be interpreted in the light of the theory stressing the importance of the quality of investors' protection. It could be argued that if Czech investors are more risk averse and more concerned with diversification this is largely due to the weakness of the legal protection they face.

Keywords: Ownership concentration, mass privatisation, corporate governance, transition

JEL Classification: G3, L2, P3, P5

Suggested Citation

Grosfeld, Irena and Hashi, Iraj, The Emergence of Large Shareholders in Mass Privatized Firms: Evidence from Poland and the Czech Republic (October 2004). Available at SSRN: https://ssrn.com/abstract=588906 or http://dx.doi.org/10.2139/ssrn.588906

Irena Grosfeld (Contact Author)

Paris School of Economics ( email )

48 Boulevard Jourdan
Paris, 75014
France

Iraj Hashi

Staffordshire University Business School ( email )

Stoke on Trent
United Kingdom

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

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