Ownership concentration & firm performance: Evidence from an emerging market

The initial view of the advantages of ownership concentration in joint stock companies was determined by the concern about the opportunistic managerial behavior. The growing importance of knowledge and human capital in the operation of firms shifts the focus of concern: excessive ownership concentration may stifle managerial initiative. This may be particularly true, and the results obtained in this paper support this hypothesis, in firms with high share of knowledge related activities. I explore the determinants of ownership concentration and the relationship between ownership structure and firm value in the context of a transition economy, i.e. an economy undergoing important changes in its legal and regulatory framework, in macroeconomic policy and most of all, in its property rights allocation. I focus on all non-financial companies traded on the Warsaw Stock Exchange since its inception in 1991 and up to 2003. We can observe that ownership of companies becomes more dispersed with the number of years of listing. The results reported in this paper suggest that firm adjust their ownership structure to firm specific characteristics and that firms belonging to the sector of high technology tend to have lower ownership concentration. However, the positive impact of ownership concentration on firm value detected in OLS regressions becomes even stronger when we control for the endogeneity of ownership.http://deepblue.lib.umich.edu/bitstream/2027.42/57214/1/wp834 .pd

Ownership concentration & firm performance: Evidence from an emerging market

The initial view of the advantages of ownership concentration in joint stock companies was determined by the concern about the opportunistic managerial behavior. The growing importance of knowledge and human capital in the operation of firms shifts the focus of concern: excessive ownership concentration may stifle managerial initiative. This may be particularly true, and the results obtained in this paper support this hypothesis, in firms with high share of knowledge related activities. I explore the determinants of ownership concentration and the relationship between ownership structure and firm value in the context of a transition economy, i.e. an economy undergoing important changes in its legal and regulatory framework, in macroeconomic policy and most of all, in its property rights allocation. I focus on all non-financial companies traded on the Warsaw Stock Exchange since its inception in 1991 and up to 2003. We can observe that ownership of companies becomes more dispersed with the number of years of listing. The results reported in this paper suggest that firm adjust their ownership structure to firm specific characteristics and that firms belonging to the sector of high technology tend to have lower ownership concentration. However, the positive impact of ownership concentration on firm value detected in OLS regressions becomes even stronger when we control for the endogeneity of ownership.Ownership structure, corporate governance, firm behaviour, uncertainty, knowledge economy

Large shareholders and firm value: Are high-tech firms different?

This paper explores the relationship between ownership structure and firm value in a transition economy. It distinguishes firms belonging to the sector of innovative technologies and firms from more "traditional" industries. For the latter, the results of the estimation of a simultaneous equations system give support to the hypothesis that strong monitoring and ownership concentration are beneficial for firm performance. They also show that in high-tech firms, higher ownership concentration does not improve firm performance. The sample consists of all non-financial firms listed on the Warsaw Stock Exchange since its creation in 1991.ownership structure ; corporate governance ; knowledge economy ; transition economics

The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic

Mass privatization offers a particularly suitable framework to study the change in ownership concentration as the extent of change is unusual for a stable market economy. Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we find that despite important differences in the design of the two programmes and despite different quality of legal and regulatory framework, ownership structure in the two countries has rapidly evolved and the emerging ownership patterns are remarkably similar. This suggests that private benefits of control are large and the quality of investor protection regime is low in both countries. However, looking at the relationship between the change in ownership concentration and firm performance, we find an interesting difference between the two countries: in the Czech Republic the increase in ownership concentration seems to be less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This effect may be interpreted in the light of the theory stressing the importance of the quality of investors' protection. It could be argued that if Czech investors are more risk averse and more concerned with diversification this is largely due to the weakness of the legal protection they face.http://deepblue.lib.umich.edu/bitstream/2027.42/40104/3/wp718.pd

Mass Privatisation, Corporate Governance and Endogenous Ownership Structure

We compare the change in ownership concentration in firms privatized through two different programs of mass privatization: the Czech voucher scheme and the Polish program of National Investment Funds. Despite important differences in ownership structure at the start of the process and in the quality of legal and regulatory environments, the emerging ownership patterns are remarkably similar: in the two groups of firms we observe high concentration and the emergence of industrial corporations and individuals as important dominant shareholders. Given the important evolution of ownership, we take ownership structure as endogenous and look at its determinants. We find in particular that ownership concentration depends on the degree of uncertainty in the firm's environment. In a more risky environment firms tend to have more dispersed ownership. We interpret this result in the light of the recent theories of the firm stressing the trade-off between managerial initiative and shareholder control.http://deepblue.lib.umich.edu/bitstream/2027.42/39982/3/wp596.pd

The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic

Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we show that the ownership structure in the two countries has rapidly evolved since the initial distribution of property rights Ownership concentration has significantly increased and we can observe an important reallocation of ownership claims between different groups of shareholders. This evidence goes against the main argument of the critics of mass privatization concerned with the dispersed ownership structure these programs were supposed to generate. The fact that the degree of ownership concentration is similar in Poland and in the Czech Republic suggests that private benefits of control are large in both countries. However, when we consider the determinants of ownership concentration we find an interesting difference: in the Czech Republic the increase in ownership concentration is less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This contrasting effect may be interpreted in the light of the theory stressing the importance of the quality of the legal system for investors' behaviour: Poland is usually praised for high standards of its regulation while the Czech Republic, especially in the early and mid-1990s, has been blamed for its weaknesses. So, although direct comparison of ownership concentration in the two countries does not provide confirmation of the main prediction of "law matters" theory, we find indirect evidence in its favour.ownership concentration ; mass privatization ; corporate gouvernance ; transition

The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic

Mass privatization offers a particularly suitable framework to study the change in ownership concentration as the extent of change is unusual for a stable market economy. Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we find that despite important differences in the design of the two programmes and despite different quality of legal and regulatory framework, ownership structure in the two countries has rapidly evolved and the emerging ownership patterns are remarkably similar. This suggests that private benefits of control are large and the quality of investor protection regime is low in both countries. However, looking at the relationship between the change in ownership concentration and firm performance, we find an interesting difference between the two countries: in the Czech Republic the increase in ownership concentration seems to be less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This effect may be interpreted in the light of the theory stressing the importance of the quality of investors' protection. It could be argued that if Czech investors are more risk averse and more concerned with diversification this is largely due to the weakness of the legal protection they face.ownership concentration, mass privatisation, corporate governance, transition

The Evolution of Ownership Structure in Firms Privatized through Wholesale Schemes in the Czech Republic and Poland

We compare the change in ownership concentration in firms privatized through two different programs of mass privatization: the Czech voucher scheme and the Polish program of National Investment Funds. Despite important differences in ownership structure at the start of the process and in the quality of legal and regulatory environments, the emerging ownership patterns are remarkably similar in the two groups of firms: high concentration and the emergence of industrial corporations and individuals as important dominant shareholders. Given the important evolution of ownership, we take ownership structure as endogenous and look at its determinants. We find in particular that ownership concentration depends on the degree of uncertainty in the firm's environment. In a more risky environment firms tend to have more dispersed ownership. We interpret this result in the light of the recent theories of the firm stressing the trade-off between managerial initiative and shareholder control.privatization, secondary transactions, corporate governance, transition economies, Czech Republic, Slovenia, Poland

The Emerging Aversion to Inequality: Evidence from Poland 1992-2005

This paper provides an illustration of the changing tolerance for inequality in a context of radical political and economic transformation and rapid economic growth. We focus on the Polish experience of transition and explore self-declared attitudes of the citizens. Using monthly representative surveys of the population, realized by the Polish poll institute (CBOS) from 1992 to 2005, we identify a structural break in the relation between income inequality and subjective evaluation of well-being. The downturn in the tolerance for inequality (1997) coincides with the increasing distrust of political elites.inequality, subjective satisfaction, breakpoint, transition.

The Emergence of Large Shareholders in Mass Privatized Firms: Evidence from Poland and the Czech Republic

Mass privatization offers a particularly suitable framework to study the change in ownership concentration as the extent of change is unusual for a stable market economy. Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we find that despite important differences in the design of the two programmes and despite different quality of legal and regulatory framework, ownership structure in the two countries has rapidly evolved and the emerging ownership patterns are remarkably similar. This suggests that private benefits of control are large and the quality of investor protection regime is low in both countries. However, looking at the relationship between the change in ownership concentration and firm performance, we find an interesting difference between the two countries: in the Czech Republic the increase in ownership concentration seems to be less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This effect may be interpreted in the light of the theory stressing the importance of the quality of investors' protection. It could be argued that if Czech investors are more risk averse and more concerned with diversification this is largely due to the weakness of the legal protection they face.Ownership concentration, Mass privatisation, Corporate governance, Transition