The Effects of Ownership Forms and Concentration on Firm Performance after Large-Scale Privatization

No 471, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We analyze the effect of ownership on post-privatization performance in a virtually complete population of medium and large firms privatized in a model large-scale privatization economy (Czech Republic). We reject the hypothesis that domestic or foreign private ownership, in either moderate or high ownership concentrations, leads to increased sales. However, private domestic and foreign majority and significant minority owners, as well as dispersed owners, increase profitability relative to state-owned firms. Firms with dispersed ownership register higher positive effect on profit than firms with more concentrated ownership, thus giving support to theories stressing managerial autonomy and initiative. Foreign owners with high as well as moderate concentrations of ownership uniformly reduce financial leverage, as do majority domestic owners. Domestic banks and portfolio companies as single largest owners (SLO) are incapable of carrying out major restructuring. Foreign industrial company SLOs carry out strategic restructuring in production and financing without deviating from the state ownership benchmark in terms of the labor cost. The effect of SLO does not vary with the SLO's concentration of ownership. Overall, private ownership tends to be associated with superior performance in terms of some indicators but not others, and dispersed ownership results in better or equal performance than more concentrated forms of ownership.

Keywords: ownership; performance; privatization; panel data; industrial organization (search for similar items in EconPapers)
JEL-codes: C33 D20 G32 G34 L20 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2002-05-01
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Ownership and Firm Performance after Large-Scale Privatization (2003)
Working Paper: Ownership and Firm Performance After Large-Scale Privatization (2003)
Working Paper: Ownership and Firm Performance after Large-Scale Privatization (2003)
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