Privatization's impact on private productivity: The case of Brazilian iron ore

A major motivation for the recent wave of privatizations of state-owned enterprises (SOEs) was a belief that privatization would increase SOE productivity. There are now many studies showing most privatizations achieved this goal. Our theme is that the productivity gains from privatization are much more general and widespread than has typically been recognized in this literature. In assessing the productivity gains from privatization, the literature has only examined the productivity gains accruing at the privatized SOEs. But privatization may have significant impact on the private producers that often exist side-by-side SOEs. In this paper we show that this was indeed the case when Brazil privatized its SOEs in the iron ore industry. That is, after their privatization, the iron ore SOEs dramatically increased their labor productivity, but so did the private iron ore companies in the industry.     

An efficient privatization mechanism

We consider the privatization of State-Owned Enterprises (SOEs) of which markets can be opened to competition once privatization takes place and competitors can compete successfully against them in a few years. The currently used “Revenue Maximization (RM)” scheme maximizes the government revenue from privatization but does not provide incentives for the privatized SOE to charge a price lower than the monopoly price until competition arises. We propose the “Welfare Maximization (WM)” scheme, which induces the privatized SOE to charge a competitive price without resorting to regulation. Also, WM provides greater incentives for post-privatization cost reduction.     

中国国有企业民营化绩效研究

本文研究中国国有企业民营化是否有效的问题。我们通过对国企民营化进程的考察来对此问题作出经验解答。根据世界银行一份对中国五个城市、覆盖六个行业的近300家国有企业(SOEs)1996—2001年间的调查数据,我们发现:(1)绩效较好的国有企业优先被民营化;(2)总体上来说,中国的民营化是富有成效的,尤其是提高了销售收入,降低了企业的成本,并最终导致企业盈利能力和生产率的大幅提高;而且在获得这些收益的同时并没有带来大规模的失业问题;(3)由民营机构控股、彻底民营化的企业比那些仍然是国有控股、部分民营化的企业绩效表现更好。     

政治庇护与改制:中国集体企业改制研究

公有产权的政治庇护理论认为拥有公有企业控制权的政府会从公有企业的持续经营中获取政治收益(就业、税收、企业利润以及个人福利等),政府或政府代理人的收益将会影响公有企业的改制决策。本文通过1998年至2003年全国规模以上集体企业的大样本数据,检验了政治庇护理论对公有企业改制原因的预测。结果表明,当集体企业为政府或政府代理人贡献的政治收益越高,集体企业在生产投入和产品销售上越依赖于政府,集体企业相对于地方经济越重要时,集体企业越不容易发生改制。这些结果有力地支持了政治庇护理论,并为企业改制政策制定和实施提供了重要的参考依据。     

Priorities and sequencing in privatization: Evidence from Czech firm panel data

While privatization of state-owned enterprises has been one of the most important aspects of the economic transition from a centrally planned to a market system, no transition economy has privatized all its firms simultaneously. This raises the question of whether governments privatize firms strategically. In this paper we examine the determinants of the sequencing of privatization. To obtain testable predictions about the factors that may affect sequencing, we investigate the following competing government objectives: (i) Maximizing efficiency through resource allocation; (ii) maximizing public goodwill from the free transfers of shares to the public; (iii) minimizing political costs; (iv) maximizing efficiency through information gains; and (v) maximizing privatization revenues. Next, we use firm-level data from the Czech Republic to test the competing predictions about the sequencing of privatization. Consistent with the hypotheses of a government priority on revenues and public goodwill, we find strong evidence that more profitable firms were privatized first. The sequencing of privatization is also consistent with maximizing efficiency through information gains. Our results indicate that many empirical studies of the effects of privatization on firm performance suffer from a selection bias.     

PRIVATIZATION OF THE UK'S PUBLIC UTILITIES: THE BIRTH OF THE POLICY 1979–1984

The Conservative governments of the 1980s and 1990s privatized large numbers of state industries. Yet the privatization of the public utilities was not on the political agenda at the time of the May 1979 General Election or during the early months of the first Thatcher government. Privatization of the public utilities was considered both economically unattractive and beyond practical politics. This study details how and why the sale of the public utilities became government policy by the mid‐1980s. In explaining the change two particular developments are singled out. The first involved a commissioned study by the Central Policy Review Staff of the Cabinet Office on whether monopolies could be privatized and the public interest protected. The second was the financing needs of BT at a time of strict controls on public borrowing.     

经济转轨、跨国公司进入与国有企业改革

任何转轨国家向市场经济过渡都要面临改革与开放的问题.因此,本文在经济开放的背景下,着重突出跨国公司与转轨国家之间经济的紧密联系,建立跨国公司、转轨国家政府、国内企业三者之间的混合寡占博弈模型,并以市场开放、自由化、私有化等政策变量作为影响转轨进程的外生变量,分析开放程度和经济调控手段以及跨国企业的投资策略等对转轨国家国有企业民营化进程和转轨国家国有企业竞争力的影响.研究表明,转轨国家在经济开放的条件下,对国有企业完全民营化并非是改革的最优方案,而对国有企业的部分民营化效果反而会更好,也符合社会福利最大化的原则.而税率、技术、转移价格等也是影响转轨国家社会福利和转轨国家企业产量和竞争能力的重要因素.     

Determinants of privatization of public corporations: evidence from the Japanese experience

The main purpose of this study is to find factors affecting privatization decisions. This study investigates the determinants of privatization by applying the probit model for a data set of special public corporations in Japan. In December 2001, the Japanese government made a resolution to consider the privatization of special public corporations, evaluating 74 special public corporations for possible privatization. In the empirical analysis on the determinants of privatization, we find that among several factors affecting privatization decisions, two are important—the market condition factor and the policy/regulation factor. As for market conditions, a public corporation which exists in a commercialized industry is about 20% more likely to be privatized than others. As for the policy and regulation factor, the public corporation’s privatization under a single regulator is about 25% more likely, compared with the public corporation’s privatization under multiple regulators.     

The impact of privatization on efficiency and profitability

Over the past three decades, China has undergone tremendous economic and social change as a consequence of the transition from a centrally planned to a market economy. This paper examines a key feature of this transition – the privatization of the state‐owned enterprises (SOEs) – through both a theoretical model and empirical analysis. Using newly collected primary data from a variety of sources, we study how privatization of listed SOEs affects employment, wages, profits and other aspects of economic performance at the firm level. Our major finding is that privatization results in substantial downsizing of employment, increased labour productivity and rising profitability.     

China’s secondary privatization: new evidence on controlling shareholders tunnelling

This article utilizes the 2005 split-share structure reform (SSSR) in China as a natural experiment and conducts difference-in-differences (DID) tests to analyse corporate governance changes among Chinese SOEs compared to POEs. We show that tunnelling significantly reduced in both POEs and SOEs after the SSSR. More importantly, we find a significant and positive ‘privatization effect’ on SOEs’ tunnelling activities during the post-reform period suggesting the reductions of tunnelling were smaller among SOEs than POEs following the SSSR. In contrast, excess returns around the SSSR indicate that investors expected a negative ‘privatization effect’ on SOEs’ tunnelling. These findings suggest that the quality of corporate governance did not improve among SOEs as a result of the secondary privatization as the stock market expected without fundamental changes to firm ownership and control following the SSSR. The benefits of privatization accrue to the government controlling shareholders rather than minority investors.     

Economic policy uncertainty and mergers and acquisitions: Evidence from China

This study examines the relationship between economic policy uncertainty and mergers and acquisitions (M&As) in China. Using all listed Chinese companies on the Shanghai and Shenzhen Stock Exchanges as well as 4188 ​M&A deals from the period of 2001–2018, we show that Chinese firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behavior of US firms. We further show that state-owned enterprises (SOEs) are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. SOEs are less likely to use only cash for their acquisitions during periods of high economic policy uncertainty. These results indicate the prudence of SOEs regarding acquisitions relative to non-SOEs during periods of high economic policy uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholder wealth for acquirers, and this wealth effect is more pronounced for SOEs.     

Privatization of state-owned enterprises in Poland

The transition from centrally planned to market economies in Eastern Europe has become a field of debate in economic literature since the late 1980s. Privatization plays a very important role because it is also a sensitive political problem. Privatization is a key element of the several reform packages that are being applied in Poland. This paper examines the different ways that small- and medium-sized enterprises were privatized from 1990 to 1995 using statistical data of the Ministry of Privatization [1995]. Analyzed enterprises are presented by the following group of projects. Capital privatization, direct foreign investment, joint stock companies awaiting privatization, and other methods of privatization are connected with the special program designed for firms with bad financial standing.     

Effect of political connections on corporate financial constraints: new evidence from privatization in China

Taking advantage of the SOEs privatization events in China, our research looks to identify the causal effect of political connections on corporate financial constraints. In a difference-in-differences framework, we demonstrate that after the transfer of control from state to private owners, privatized SOEs hoard more cash, save more cash from incremental cash flow, and exhibit higher cash flow sensitivity of investment.     

Evaluating Partial Reforms in the Chinese State Industrial Sector: a stochastic frontier cost function approach

China's phenomenal economic growth since 1979 is seen by many as a challenge to the belief that the clarification of property rights is a necessary step of successful transition from a planned economy to a market economy. Instead of mass and rapid privatization, reforms in the Chinese state industrial sector in the 1980s were attempted to reconstruct the incentive structure of enterprises by linking rewards to performance, expanding managerial freedom and exposing enterprises to market influences. This paper investigates the extent to which the partial reforms have transformed the behaviour and performance of state-owned enterprises (SOEs). Using a panel of observations on 769 SOEs from ten manufacturing industries during 1980 and 1989, a stochastic cost frontier function is estimated to measure the effect of various reform measures on both technical and allocative efficiency. We found that the average cost efficiency level increased by 1.18% per annum during the decade. The efficiency effects of the industrial reform programme are mixed. While performance-related bonuses and market competition appear to have had the intended impact, there is evidence that devolution of decision-making power to the firm level has led to deterioration in efficiency. Therefore, although the partial reforms have met with some success, the issue of an adequate structure of incentives for SOEs remains unresolved.     

Uncovering asset stripping during China's privatization

This paper empirically studies the occurrence and extent of asset stripping via undervaluing public assets during the mass privatization of state-owned and collectively owned enterprises in China. Using three waves of a national survey of private firms, we provide evidence that state-owned and collectively owned assets were substantially underpriced, indicating the presence of corruption during privatization. Further analysis shows that the extent of underpricing is more severe in regions with less market competition or weaker property rights protection, and more pronounced for intangible assets such as intellectual property rights and land use rights. When comparing firm efficiency between privatized firms and de novo private firms, we find that the former group continues to enjoy considerable preferential treatments, yet significantly underperforms the latter, possibly due to continued government control and intervention. Finally, we provide evidence that insider privatization is an important source of corruption during the privatization process.     

The role of state enterprises in the transition from command to market economies

In transition from command to market economies total privatization has proved to be impossible to achieve, and a substantial part of large enterprises are likely to remain in full or partial state ownership. Hasty privatization has in many cases even proved to be destructive. There is a need to reconsider the basic approach to transition. Contrary to conventional wisdom prevailing in mainstream economics state-owned enterprises (SOEs) are not necessarily inferior to private firms in economic efficiency. J. Kornai's soft-budget constraint is reconsidered. Two models are suggested under which SOEs may prove to be viable in the long run and serve to promote a smoother physical transition. Under Model One (which is the general case) SOEs are largely separated from the state and operate on the basis of profit maximization. Under Model Two (which applies to certain industries) different objective functions are chosen for purposes of economic efficiency. Finally, preserving SOEs is seen as an alternative means of reducing inequitable income distribution at the source where primary incomes are created.     

双轨制、价格市场化与总量投资分析

本文在新古典投资理论的框架下引入中国转轨时期的制度性因素,建立包括私有部门、国企部门以及政府部门的投资行为模型,论证了国有企业多重目标而导致其过度投资和资本积累,同时解释了在转轨过程中出现的诸如"国退民进"等演化现象,论证了政府倾向于干预经济,施行"逆风向行事"规则,然而因其对项目真实利润的不可准确估测性会导致投资的过度波动,从而表明政府投资可能是经济中投资波动的来源。     

Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises

This paper explores the effect of policy burdens of China’s state-owned enterprises (SOEs) on senior executives’ excessive perks. The empirical analysis demonstrates that SOE policy burdens are significantly and positively correlated with senior executives’ excessive perks, indicating that SOE policy burdens increase agency cost. The results hold after controlling for potential endogeneity. Moreover, we find the following evidences. Strategic policy burdens of SOEs have a significantly greater impact on their senior executives’ excessive perks, compared with social policy burdens. The positive impact of SOE policy burdens on excessive perks is significantly weaker in east China due to the higher degree of marketization. The central government’s stricter supervision can also alleviate the positive correlation between policy burdens of centrally administered SOEs and senior executives’ excessive perks.     

Privatization in PolandWhat was the government trying to achieve?1

This article uses the sequencing of privatization to infer the objective pursued by the Polish government in the privatization of its large manufacturing firms in the second half of the 1990s. We construct a model of mixed oligopoly and use it to evaluate the privatization process; our analysis is based on the assumption that firms which furthered the government's objective function the most would be chosen to be privatized first. Based on the features of the firms that were chosen for early privatization, our empirical analysis suggests that welfare maximization was more important than the desire to maximize the revenues from privatization and the government's budget or to minimize employment losses.     

Property rights in land and output growth in Russia

This paper tests whether the implementation of a key market‐oriented reform in post‐Soviet Russia, property rights in land, proxied by the percent of privatized land by region, affected the pace of sub‐national economic growth during two unprecedented expansion periods: 2001–2008 and 2010–2014. Individuals gained the Constitutional right to own land in 1993, but implementation was stalled. The pace of land privatization can be explained by arguably exogenous factors such as distance to Moscow, as well as climate and also regional political culture, proxied by concentration of votes in the 2004 presidential election. We show that this rate of land privatization in Russia's regions was significantly associated with output growth in 2010–2014, confirming the policy importance of this measure for developing economies. Regions where private holdings expanded most rapidly with the enforcement of property rights in land, gained a competitive advantage in the growth process through increased investment in fixed assets and private consumption.