Ownership and Corporate Performance after Large Scale Privatization
We analyze the effects of ownership type and concentration on performance of a population of firms in a model large-scale privatization economy (Czech Republic). Using specifications based on first-differences and unique instrumental variables, we find that few types of private ownership improve dynamic post-privatization performance. Concentrated foreign (but not domestic) ownership improves some measures of performance relative to state ownership. Foreign investors engage in strategic restructuring by increasing the rate of change of sales, while domestic private owners reduce the rate of change of sales and labor cost without increasing profitability. The effects of concentrated foreign ownership support the agency theory and go against theories stressing the positive effects of managerial autonomy and initiative. Our results are also consistent with the thesis that large domestic stockholders are not improving performance because they loot the firms. We find some support for the hypothesis that firms restructure by first lowering and later increasing the rate of change of employment. The state as a holder of the golden share has a positive effect on employment, while stimulating profitable restructuring. The state hence appears as a more economically and socially helping agent than in some recent studies.
About the Authors
CERGE, Charles University and the Economics Institute
University of Michigan
James T. Shotwell Professor of Global Political Economy; Director, Center on Global Economic Governance
School of International and Public Affairs, Columbia University
Jan Svejnar focuses on the effects of government policies on firms, labor and capital markets; corporate, national, and global governance and performance; and entrepreneurship.
Professor Svejnar previously served as director of the International Policy Center at the Gerald R. Ford School of Public Policy at the University of Michigan. He is a founder and Chairman of CERGE-EI in Prague (an American-style Ph.D. program in economics that educates economists for Central-East Europe and the Newly Independent States). He serves as the Chairman of the Supervisory Board of CSOB Bank and co-editor of Economics of Transition. He is a Fellow of the European Economic Association and Research Fellow of the Center for Economic Policy Research (London) and Institute for the Study of Labor (IZA, Bonn).
Professor Svejnar was honored for his distinguished work with a 2012 Neuron Prize from the Prague-based Karel Janeček Endowment for Research and Science. He was one of three honorees for lifelong achievement, a recognition considered to be the Czech Republic's most prestigious for science. The Endowment spokesperson stated:
Prior to joining Columbia University in 2012, Professor Svejnar taught at the University of Michigan, University of Pittsburgh, and Cornell University. He received his B.S. from Cornell University’s School of Industrial and Labor Relations and his M.A. and Ph.D. in Economics from Princeton University.