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

Author

Listed:
  • Irena Grosfeld

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Iraj Hashi

    (Faculty of Law and Business - Staffordshire University Business - Staffordshire University)

Abstract
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.

Suggested Citation

  • Irena Grosfeld & Iraj Hashi, 2005. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," PSE Working Papers halshs-00590865, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00590865
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00590865v1
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    References listed on IDEAS

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    Cited by:

    1. Grosfeld, Irena, 2009. "Large shareholders and firm value: Are high-tech firms different?," Economic Systems, Elsevier, vol. 33(3), pages 259-277, September.
    2. Jan Hagemejer & Joanna Tyrowicz, 2020. "A New Instrument for Measuring the Local Causal Effect of Privatisation on Firm Performance," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 35-52.
    3. Irena Grosfeld, 2006. "Ownership concentration & firm performance: Evidence from an emerging market," William Davidson Institute Working Papers Series wp834, William Davidson Institute at the University of Michigan.
    4. Zorica Kalezić, 2015. "Ownership Concentration and Firm Performance in Transition Economies: Evidence from Montenegro," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 4(3), pages 5-64.
    5. Jan Hagemejer & Joanna Tyrowicz & Jan Svejnar, 2014. "Measuring the Causal Effect of Privatization on Firm Performance," Working Papers 2014-14, Faculty of Economic Sciences, University of Warsaw.
    6. Irena Grosfeld, 2006. "Ownership concentration and firm performance: Evidence from an emerging market," Working Papers halshs-00590485, HAL.

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    More about this item

    Keywords

    ownership concentration; mass privatization; corporate gouvernance; transition;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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