Origin and Concentration: Corporate Ownership, Control and Performance

Abstract

We analyze the effects of different types and concentration of ownership on performance using a population of firms in a model transition economy after mass privatization. Specifications based on first-differences and unusual instrumental variables show that contrary to conventional wisdom, the effects of privatization and different types of ownership are limited and many types of private owners do not generate performance that is different from that of firms with state ownership. Concentrated ownership has a positive effect but only in some instances and a positive effect of foreign ownership is detectable primarily for majority ownership and foreign industrial firms. The effects of concentrated ownership support the agency theory and go against theories stressing the positive effects of managerial autonomy. Our results are also consistent with managers or stockholders “looting” the firms. The state as a holder of the golden share has a positive effect on employment and in some specifications also on output and profitability. Overall, our results suggest that the expectations and earlier findings of positive effects of privatization on performance were premature, with the effects of many types of ownership being indistinguishable from that of state ownership.