Divide and Privatize : Firms Break-up and Performance

We analyze the long-term effects of divesture and ownership change on corporate per-formance. We employ a unique data set for a large number of Czech firms spanning the period 1996–2005. We employ a propensity score matching procedure to deal with endogeneity problems. Our results, which are generally in line with the positive effects of divestiture found in the developed-market literature, show that the initial effects of di-vestiture are positive but after a certain point they quickly diminish over time.firm divestiture, corporate performance, ownership changes, privatization, emerging markets, endogeneity, propensity score matching procedure

Direct and indirect effects of FDI in emerging European markets : a survey and meta-analysis

We review a large body of literature dealing with the effects of Foreign Direct Investment (FDI) on economies during their transformation from a command economic system toward a market system. We report the results of a meta-analysis based on the literature on externalities from FDI. The studies on emerging European markets covered in our survey report direct and indirect FDI effects weakening over time, similarly as in other FDI destination countries. This is imputable to a publication bias that is detected and to the fact that more sophisticated methods and more controls can be used once a sufficient time span is available. Panel studies are likely to find relatively lower spillover effects. The choice of the research design (definition of firm performance and foreign firm presence) matters. More specific to the sampled studies is the role played by forward and backward linkages, which dominate other channels in driving FDI externalities.FDI, productivity spillovers, economic transformation, emerging markets, meta-analysis.

Financial Efficiency and the Ownership of Czech Firms

In this paper we analyze the evolution of firm financial efficiency in the Czech Repub-lic. Using a large panel of more than 400,000 Czech firm/years we study whether firms fully utilize their resources, how firm financial efficiency evolves over time, and how firm financial efficiency is determined by ownership structure. We employ a panel ver-sion of a stochastic production frontier model for the period 1996–2007 with time-invariant efficiency. We differentiate among various degrees of ownership concentra-tion and their domestic or foreign origin. In a two-stage set-up we estimate the degree of firm inefficiency and then we estimate the effect of ownership structure on the distance from the efficiency frontier. Our results support the hypothesis that concentration and foreign ownership are positively related to financial efficiency.financial efficiency, ownership structure, firms, panel data, stochastic frontier

Media Treatment of Monetary Policy Surprises and Their Impact on Firms' and Consumers' Expectations

We investigate whether monetary policy announcements affect firms' and consumers' expectations by considering their media treatment. We initially use standard monetary policy surprise measures and analyze how the main general newspapers in France report on the announcements. Eighty-five percent of the monetary policy surprises are either not associated with the newspapers reporting a change in the monetary policy stance or have a sign inconsistent with the media report. Only when we consider media-consistent monetary policy surprises do we find that consumers and firms respond to monetary policy announcements. The economic tonality of the media reports drives the sign of consumers' response.Kočenda acknowledges support from the GAČR, grant no. 19-26812X, within the EXPRO Program. Pinter acknowledges support from the National Funds of the FCT – Portuguese Foundation for Science and Technology within the project «UIDB/03182/2020»

European perspective on the links among public investments, banking and sovereign risk

Sovereign risk has become a pressing issue for the European Union (EU) in the aftermath of the global financial crisis (GFC) of 2007-2008. At the same time, the link between sovereign risk and the banking sectors of EU countries emerged, as several EU governments had to intervene to stabilize their banking sectors during the severe turmoil of the GFC (Correa et al., 2014). After all, based on the ECB Statistical Warehouse data, on average around 9% of total assets of EU banks consists of sovereign bonds of EU countries. The sovereign risk and banking sector nexus in the EU has important implications for public finances in EU member states. When governments see banks in their countries in need of help, they might decide to prepare a bail-out package to save the financial institutions. Such a solution might become a burden on public finances: a government must borrow funds and at the same time there is less fiscal space for public investments. One outcome is that sovereign risk might increase. On the other hand, a bail-out of the banking system can be considered a cost-effective option if it prevents the economy from collapsing. Arguably, an economic collapse would negatively affect public finances to an even greater extent. Brůha and Kočenda (2018) analyze the potential nexus between sovereign risk and the characteristics of banking sectors in the EU, including their quality and performance. Their analysis allows general conclusions to be drawn about the whole of the EU as well as those specific to regional groups. It also offers potential policy implications regarding public finances and public investments in EU countries

Trade in parts and components across Europe

With the rise of global value chains, trade in intermediates now accounts for more than two-thirds of total trade. This column provides evidence that trade in parts and components of capital goods between new and old EU countries is driven by wage differences across countries. It further shows that wage differences play an especially important role in the ex ante investment decision to establish a new production network

Origin and concentration: Corporate ownership, control and performance in firms after privatization

We analyse the effects of different types and concentration of ownership on performance using a large population of firms in the Czech Republic after mass privatization. Specifications based on first-differences combined with instrumental variables show that the performance effects of different types and concentration of ownership are limited when compared to earlier studies. Often, concentrated ownership has a positive effect, a finding that supports the agency theory. The positive effect of foreign ownership is detected primarily for majority ownership and for ownership by foreign industrial firms. The state as a holder of the golden share has a positive effect on employment and sometimes, also on output and profitability. Overall, our results highlight the benefits of strategic restructuring accompanied by an inflow of new capital and managerial culture

Divestitures, privatization and corporate performance in emerging markets

We use new firm-level data to examine the effects of firm divestitures and privatization on corporate performance in a rapidly emerging market economy. Unlike the existing literature, we control for accompanying ownership changes and the fact that divestitures and ownership are potentially endogenous variables. We find that divestitures increase the firm's profitability but do not alter its scale of operations, while the effect of privatization depends on the resulting ownership structure – sometimes improving performance and sometimes bringing about decline. The effects of privatization are thus more nuanced than suggested in earlier studies. Methodologically, our study provides evidence that it is important to control for changes in ownership when analyzing divestitures and to control for endogeneity, selection and data attrition when analyzing the effects of divestitures and privatization

Structural Changes in Transition Economies: Breaking the News or Breaking the Ice?

This paper extends the existing literature in structural breaks in transition economies in Central and Eastern Europe, analyzing structural breaks in the volatility of monthly key macroeconomic variables, such as industrial production, inflation, monetary aggregates, nominal exchange rates and series related to the labor market. Using the Iterated Cumulative Sums of Squares (ICSS) algorithm developed by Inclán and Tiao (1994) and the Bayesian procedure developed by Wang and Zivot (2000), we provide strong evidence in favor of structural breaks in the variance of the series under investigation. The instability found has important implications for macroeconometric modeling.http://deepblue.lib.umich.edu/bitstream/2027.42/41234/1/IPC-working-paper-016-Kocenda.pd