Ownership structure,monitoring, and market value of companies: evidence from an unusual privatization mode

This study analyses the impact of ownership structure and market liquidity on company value. We investigate different aspects of ownership: the risk of political interference, private investors vs. the state acting as influential blockholders, and preferential political treatment of companies. Using a unique dataset of Polish partial privatizations initiated by shares transfers to entities under limited government influence, we find that government divestments can enhance company value, due to reduction in risk of political interference. A potential increase in the liquidity of trades in transferred companies’ shares also boosts their market value. On the other hand, an increased likelihood of the emergence of private blockholders able to expropriate minority shareholders reduces the firm’s market value. Our results support the political view of privatization: governments have objectives different to profit maximization, which leads to suboptimal investment from this point of view and lower market value of companies. We also develop a model to empirically distinguish between different aspects of ownership on company value.     

Ownership dynamics and firm performance in an emerging economy: a meta-analysis of the Russian literature

This paper provides a meta-analysis of studies on the effect of ownership on the performance of Russian firms over 20 years of rapid institutional and economic changes. We review 29 studies extracted from the EconLit and Web of Science databases with a total of 877 relevant estimates. We find that the government negatively affects company performance regardless of its administrative level. In contrast, private ownership is positively associated with firm performance. However, the effect size and statistical significance are notably varied among different types of private ownership. While the effect of insider (employee and management) ownership is comparable to that of foreign investors, the effect of domestic outsider investors is considerably smaller. Our assessment of publication selection bias reveals that the existing literature does not contain genuine evidence for a series of ownership types and, therefore, some of the findings have certain limitations.     

Post-privatization corporate governance and firm performance: The role of private ownership concentration,identity and board composition

We examine and analyze the post-privatization corporate governance of a sample of 52 newly privatized Egyptian firms over a period of 10 years, from 1995 to 2005. We look at the ownership structure that results from privatization and its evolution; the determinants of private ownership concentration; and the impact of private ownership concentration, identity and board composition on firm performance. We find that the state gives up control over time to the private sector, but still controls, on average, more than 35% of these firms. We also document a trend in private ownership concentration over time, mostly to the benefit of foreign investors. Firm size, sales growth, industry affiliation, and timing and method of privatization seem to play a key role in determining private ownership concentration. Ownership concentration and ownership identity, in particular foreign investors, prove to have a positive impact on firm performance, while employee ownership concentration has a negative one. The higher proportion of outside directors and the change in the board composition following privatization have a positive effect on firm performance. These results could have some important policy implications where private ownership by foreign investors seems to add more value to firms, while selling state-owned enterprises (SOEs) to employees is not recommended. Also, the state is highly advised to relinquish control and allow for changes in the board of directors following privatization as changing ownership, per se, might not have a positive impact on firm performance unless it is coupled with a new management style.     

The reallocation of workers and jobs in Russian industry

Gross job and worker flows in Russian industry are studied using panel data from a survey of 530 firms selected through national probability sampling. The data permit examination of several crucial measurement issues, including the timing and definition of employment and the role of reorganizations, and they contain rich information on firm characteristics. We find that new and reorganized firms display larger flows than unreorganized enterprises. Product market dispersion and managerial and dispersed outsider ownership are associated with greater worker churning, and unionization and concentrated outsider ownership with less. There is little evidence that the average firm's employment adjustments have become more responsive to adjustment costs during the transition, but private ownership and product market competition appear to increase responsiveness. JEL Classifications: E24, J23, J63, P23, P31.     

Multinational firms,acquisitions and job tasks

We revisit the question how inward FDI and multinational ownership affect relative labor demand. Motivated by the recent literature that distinguish between skills and tasks, we argue that the impact of multinational and foreign ownership on the demand for labor is better captured by focusing on job tasks rather than education. We use Swedish matched employer–employee data and find that changes of local firms to both foreign and Swedish multinationals increase the relative demand for non-routine and interactive job tasks in the targeted local firms. Hence, in a high-income country, both inward and outward FDI have a task upgrading impact on local firms. The effect is primarily driven by wage effects leading to increased wage dispersion for workers with different non-routine and interactive task intensity. We also show that the effect is not the same as skill upgrading since dividing employees by educational attainment does not capture changes in the relative labor demand. Hence, our results suggest a new aspect of the labor market consequences of FDI.     

The Impact of Foreign Entry on Chinese Banks

Utilizing hand collected data concerning foreign ownership in the Chinese banking sector, we examine whether foreign ownership improves the efficiency of Chinese banks. Foreign banks tend to provide cooperation in retail banking rather than in corporate or private banking. We find no robust evidence of an improvement in the efficiency of an average bank that receives foreign strategic investments. However, the bank cost and profit efficiency significantly improve when foreign strategic investments provide retail banking and internal control assistance respectively to local banks. These findings suggest that foreign investment improves local bank efficiency when it transfers technologies that are lacking in local banks.     

Foreign-owned firms around the world: A comparative analysis of wages and employment at the micro-level

This paper provides the first microeconomic cross-country analysis of the effects of foreign ownership on wages, employment and worker turnover rates. Using firm-level and linked worker-firm data, we apply a standardised methodology for three developed (Germany, Portugal, UK) and two emerging economies (Brazil, Indonesia). We find that wage effects are larger in developing countries, and that for each country the largest effect on wages comes from workers who move from domestic to foreign firms. Employment growth after foreign takeover is concentrated in high-skill jobs. In contrast to widespread fears, there is no evidence that wage gains come at the expense of greater job insecurity; separation rates actually fall slightly after takeover. We conclude that the positive effect of foreign ownership on wages is not primarily driven by its impact on incumbent wages, but by its impact on the creation of high-wage jobs.     

Are private banks more efficient than public banks?

We study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and, surprisingly, that domestic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank's environment, management's risk preferences, the bank's activity mix or size, the econometric approach, or the introduction of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks than from bank privatization.     

Ownership,competition, and bank productivity: An analysis of Indian banking in the post-reform period

This paper investigates the effect of ownership and competition on Indian bank productivity since the 1991 reforms. We find that Indian private banks dominate the public and foreign banks both in terms of productivity levels and productivity growth, with the new Indian private banks leading the charge. Competition has a positive impact on productivity for the old Indian private banks, and all the other banks are hurt by competition — the worst hit being new Indian private banks. A similar picture emerges on the productivity growth side, with the new Indian private bank productivity growth being the worst affected as competition increases. An analysis of the pre- and post-1998 periods shows that the latter period displays a much higher productivity gap between the Indian private banks and the public and foreign banks. Indian private bank productivity and productivity growth suffer due to increasing competition in the post-1998 period.     

A fire sale without fire: An explanation of labor-intensive FDI in China

China's labor-intensive industries are characterized by low technology and high competition. The massive inflow of FDI in China's labor intensive industries is inconsistent with the conventional wisdom that FDI should be more prevalent in technology-intensive and low competition industries. To explain this puzzle, we offer a “fire sale” hypothesis: facing severe financial constraints, Chinese private firms give up their equity to form joint ventures with foreign firms in order to obtain financing. Using the garment industry as an example, we find that among domestic firms, the financial constraint index is highest for private firms and lowest for state-owned firms. We further estimate a probit model of joint-venture decisions by private firms. Our results suggest that those private firms with greater financial constraints are more likely to seek foreign joint ownership. The effect of financial constraints on joint venture decision is both statistically and economically significant.     

Foreign penetration and undesirable competition

This paper examines how the order of the firms' moves affects the social efficiency with foreign ownership and free entry in a mixed oligopoly market. We firstly show that when the foreign shareholding ratio is low, the entry of private followers will lead to a lower consumer welfare and higher social welfare, while the profit of the incumbent nationalized firm is higher under entry than under no entry. Further, we find that there always exists the problem of excessive entry under public leadership regardless of the degree of foreign ownership. Such result is generated by the complementary role played by the leading public firm and the strength of business-stealing effect. Our results thus have important implications for industrial and market-opening policies.     

Enterprise performance and ownership: The case of Ukraine

In this paper, we use a unique enterprise level random survey of 150 firms in Ukraine to test hypotheses on the relationship between enterprise performance and ownership in transitional economies. In particular, we explore whether privatisation has yielded improved company performance and whether specific ownership forms (insider, manager, worker, and outsider) have led to differentiated behaviour at the enterprise level. Our analysis also explores the determinants and ramifications of barter, a widespread phenomenon across the former Soviet Union. We refute the hypothesis that private ownership per se is associated with improved performance, and try to isolate any positive performance effects from outsider ownership. However, we do isolate some clear ownership effects, associated with insider ownership. We find barter to be associated with lower profitability, and to be less common in privatised firms.     

Uk Corporate Acquisitions In Latin America In The 1990s: Lost Opportunities In A New Economic Environment

During the 1990s, foreign direct investment flowed into Latin America at an unprecedented rate. Capital inflows associated with privatizations and private mergers and acquisitions (M&As) rose steeply. Drawing on original firm–level transactions data, this article examines the extent to which UK enterprises participated in the Latin American privatization and private M&A boom. The authors conclude that, relative to their counterparts in many other major industrial countries, UK enterprises adopted a cautious stance, largely eschewing privatization opportunities and concentrating M&A activities on relatively few operations, sectors and countries, in order to strengthen product and market positions. Moreover, the strategic logic guiding the most important corporate acquisitions centred on gaining access to domestic markets rather than attempting to create global export platforms.     

异质机构、企业性质与自主创新

本文通过放松经理人市场的完全竞争性假定,拓展了经典职业生涯模型,藉此研究了中国制度背景下的机构持股、企业性质与企业创新的关系,并基于2004—2009年923家上市公司的数据,从R&D投入和专利申请两个维度对本文拓展模型的命题进行了实证检验。结果表明:(1)异质机构对企业创新有不同的影响,证券投资基金对企业创新有显著的负效应,这种负效应在国有企业中表现得更为明显;(2)民营企业中机构投资者持股促进了企业的创新活动,国有企业中机构投资者持股与企业创新呈显著的负相关关系;(3)机构投资者整体持股对全样本企业的专利申请有不显著的正效应,而对R&D投入则有显著的负效应。     

Infrastructure privatization and changes in corruption patterns: The roots of public discontent

This paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers. We show that there are cases in which privatization, even though it fosters investments in infrastructure, also opens the door to more corruption. The public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption. Our model thus helps understand the seemingly paradoxical situation prevailing in Latin America, where most studies find that privatizations have been efficiency-enhancing and have fostered investments and, at the same time, popular dissatisfaction with the process is extremely high, especially among the middle class. We show that this line of explanation is consistent with the evidence from surveys in the region.     

Imported inputs and privatization in downstream mixed oligopoly with foreign ownership

This paper examines welfare implications of privatization in a mixed oligopoly with vertically related markets, where an upstream foreign monopolist sells an essential input to public and private firms located downstream in the domestic country. The impact on domestic welfare of privatizing the downstream public firm is shown to contain three effects. The first is an output distortion effect, which negatively affects welfare since privatization decreases the production of final good for consumption. The second is an input price lowering effect resulting from a decrease in derived demand for the input. When the level of privatization increases, a decrease in final good production lowers input demand, causing input price to decline and domestic welfare to increase. The third is a rent‐leaking effect associated with foreign ownership in the downstream private firm. The rival domestic firm strategically increases its final good production, causing profits accrued to foreign investors to increase and domestic welfare to decline. Without foreign ownership in the downstream private firm, the optimal policy toward the public firm is complete privatization as the output distortion effect is dominated by the input price lowering effect. With foreign ownership, however, complete privatization can never be socially optimal due to the additional negative impact on domestic welfare of the rent‐leaking effect. We further discuss implications for domestic welfare under different privatization schemes (e.g., selling the privatization shares to the upstream foreign monopolist or to the rival domestic firm).     

The effects of privatization on productive efficiency: evidence from the Baltic republics

By using new and unusual data sets for large samples of firms in Estonia, Latvia and Lithuania we find that, since privatization, diverse patterns of enterprise ownership have emerged and ownership configurations are quite dynamic.   To test competing theories on the productivity effects of alternative ownership structures, identical cross sectional production functions specifications are estimated for each country for varying years during 1993 1996. While the effects of private ownership upon productivity are found to vary considerably over time and across countries, productivity effects are always found to be either zero or positive, thus providing partial support for the hypothesis that state ownership is less efficient than private ownership.   Findings are mixed concerning hypotheses on the effects of particular ownership structures. Often (e.g. for Lithuania) estimates indicate that all forms of private ownership have zero productivity effects. However, some estimates for Estonia provide support for the mainstream hypothesis that outside (and especially foreign) ownership is preferred to insider ownership. But in other estimates (again for Estonia) majority ownership by employees is found to deliver better business performance than majority ownership by managers (thus refuting the hypothesis that the preferred form of insider ownership is ownership by managers).     

Ownership Structure and Firm Performance: Evidence from Vietnamese Listed Firms

We examine the effect of ownership structure on firm performance, for firms listed on Vietnamese stock exchanges, using 2744 firm‐year observations over the period from 2007 to 2012. We find a non‐linear relationship between ownership structure and firm performance. State ownership has a convex relationship with firm performance. This paper finds that firm performance increases beyond 28.67 percent level of state ownership. Foreign ownership has a concave relationship with firm performance. We find that firm performance increases with an increase of foreign ownership up to a level of 43 percent and then decreases. Policy makers should encourage foreign ownership and widely dispersed state ownership in firms, which can help improve firm performance.     

Institutional environment,ownership and firm taxation

This paper examines how ownership type and institutional environment affect firm taxation. Using a sample of Chinese‐listed firms from 1999 to 2006, we find that private firms enjoy a lower effective tax rate than local state‐owned enterprises. In addition, the preferential taxation of private firms is associated with local government incentives to promote local economic growth. We find that private firms located in regions with a lower level of privatization receive preferential tax treatment. Our results also suggest that decentralization and interjurisdictional competition lead to financial interdependence between local governments and private firms.     

Implicit protectionism via state enterprises and technology transfer from foreign enterprises

We formulate a mixed triopoly in which one state enterprise competes with one domestic and one foreign private enterprise. The private enterprise can transfer its technology to the private rival, which reduces the rival’s production cost. We show that if the privatization policy is endogenous, then the foreign firm voluntarily transfers its technology. We also show that the foreign enterprise may strategically raise its local ownership share. These results suggest that the existence of a state enterprise and its potential future privatization serve as an industrial policy that improves the domestic firm’s competitive advantage relative to the foreign enterprise.