Ownership change, institutional development and performance

Abstract

This paper conducts a cross-country empirical study of the impact of institutions and agency conflicts on ownership reforms and their implications for changes in performance and efficiency. We examine two main questions. First, we evaluate the effects of certain property rights and institutional quality measures on performance and efficiency. We find that property rights and contracting rights protections contribute to stronger post-privatization performance. Second, we ask whether sectors undergoing changes from state to private ownership exhibit better or worse performance than sectors remaining public. We find an insignificant effect of privatization in ordinary least squares estimates and a negative short-term effect after correcting for endogeneity of privatization decisions that disappears in the long run, consistent with recently privatized enterprises facing short-run costs of restructuring and the challenges of mitigating agency and expropriation concerns.

Political Connectedness, Corporate Governance, and Firm Performance

“…Therefore, an alternative explanation of our empirical results could be that the best companies were privatized first (the cherry-picking effect 27 ) and the remaining state-owned companies are those that have been less productive since the early 1990s. When correcting for endogeneity bias, however, the most recent studies on privatization outcomes in transition countries find an insignificant or even negative short-term effect of privatization on productivity compared to state-owned firms largely due to the short-run costs of restructuring and the challenges of mitigating agency and expropriation concerns (Sabirianova et al 2012;Knyazeva et al 2013). Moreover, according to this view, setting up property rights and contracting rights before commencing privatization is crucial for the post-privatization performance of privatized firms.…”

“…Strengthening property rights protection, mitigating expropriation threats, improving the enforcement of contractual rights and the effectiveness of the legal system (Sabirianova et al 2012;Knyazeva et al 2013) can surely contribute to the success of privatization. The political connectedness of firms that gives rise to political corruption will presumably be reduced as democratic institutions become stronger and able to punish corrupt behavior.…”

Lessons from the Lithium Triangle: Considering Policy Explanations for the Variation in Lithium Industry Development in the “Lithium Triangle” Countries of Chile, Argentina, and Bolivia

“…Thus, Nadgrodkiewicz (2012, 2‐3) argues that property rights need to be broadened, and states should “strengthen institutions that make property titles meaningful [which] is key to the success of both democratic and market‐oriented reforms in transition countries.” Knyazeva, Knyazeva, and Stiglitz (2013) find that a state's property rights protections against expropriation actually increases profitability, supporting the idea that rule of law will lead to growth and development. Similarly, in a study across 32 developing countries, Boubakri, Cosset, and Guedhami (2005) find greater improvements in efficiency and output in countries where property rights are more strongly protected and enforced.…”

Family firms and financial analyst activity

“…For potential endogenous binary variables, treatment effects estimations are more suitable than instrumental variables estimations(Knyazeva et al (2013)). 16 These instruments have been used in a number of recent studies, such asBebchuk and Cohen (2005),John and Knyazeva (2006),Cheng and Subrahmanyam (2008),Jiraporn et al (2014), andLiu (2016).…”