Labor protection and government control: Evidence from privatized firms |
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Affiliation: | 1. Research School of High–Energy Physics, National Research Tomsk Polytechnic University, Tomsk 634050, Russia;2. Laboratoire Interdisciplinaire Carnot de Bourgogne, UMR 6303 CNRS-Univ. Bourgogne Franche-Comté 9 Avenue Alain Savary, BP 47 870, F-21078 Dijon Cedex, France;3. Institut für Physikalische und Theoretische Chemie, Technische Universität Braunschweig, D - 38106, Braunschweig, Germany;1. PSL Research University (Paris-Dauphine), LEDa, Place du Marcéhal de Lattre de Tassigny, 75775 Paris Cedex 16, France;2. Ceregmia, University of the French West Indies and Guiana, Campus Agro-Environmental Caraïbe, Petit Morne B.P. 214, 97285 Le Lamentin Cedex 2, France - INRA UR 143 Unité de Recherche en Zootechnie F-97170 Petit-Bourg, France;3. Ceregmia, University of the French West Indies and Guiana, B.P. 7209, 97275 Schoelcher Cedex, France |
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Abstract: | In this paper, we examine whether labor protection determines the decision to retain a golden share in privatized firms. Using a sample of firms privatized in developing and industrialized countries, we find a negative relation between the likelihood of observing a golden share and labor protection. However, we find that this relation does not hold in the post-financial crisis period, suggesting that the recent crisis is associated with an increase in government control. Furthermore, we show that privatized firms in countries with strong labor protection are penalized with a higher cost of equity. Overall, our results underline the importance of labor protection for an important government control mechanism, namely golden shares, as well as for equity financing costs of privatized firms. |
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