Book•
The Financial Economics of Privatization
01 Jan 2005-
TL;DR: In this paper, the authors focus on where privatization stands today and what are the next frontiers, the why and how behind countries who privatize certain industries, whether privatization works as an economic tool and important insights relevant to financial institutions such as how to value privatized industries, how share offerings differ from private offerings, how countries go about harnessing private capital.
Abstract: Central to the book's content is its focus on where privatization stands today and what are the next frontiers, the why and how behind countries who privatize certain industries, whether privatization works as an economic tool and important insights relevant to financial institutions such as how to value privatized industries, how share offerings differ from private offerings, how countries go about harnessing private capital, etc.
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TL;DR: In this article, the authors evaluate the effects of privatization in the post-communist economies and China and find that privatization to foreign owners results in a rapid improvement in performance of firms, while performance effects of privatizing to domestic owners are less impressive and vary across regions, coinciding with differences in policies and institutional development.
Abstract: The paper evaluates the effects of privatization in the post-communist economies and China. In post-communist economies privatization to foreign owners results in a rapid improvement in performance of firms, while performance effects of privatization to domestic owners are less impressive and vary across regions, coinciding with differences in policies and institutional development. In China relatively more estimates suggest that privatization to domestic owners improves the level of performance. Concentrated private ownership has a stronger positive effect on performance than dispersed ownership in the post-communist economies, but foreign joint ventures rather than wholly owned foreign firms have a positive effect in China. Worker or collective ownership does not have a negative effect. In the post-communist economies new firms are equally or more efficient than firms privatized to domestic owners, and foreign start-ups are more efficient than domestic ones. Privatization is not associated with lower employment. When accompanied by complementary reforms, privatization has a positive effect on economic growth. Three factors appear to drive the more positive effect of privatization to foreign than domestic owners. Domestic managers have more limited skills and access to world markets, domestically privatized firms have been more subject to tunneling and in some countries new large shareholders artificially decreased performance. The important policy implication is that privatization per se does not guarantee improved performance, at least not in the short- to medium-run. Type of private ownership, corporate governance, access to know-how and markets, and the legal and institutional system matter for firm performance.
720 citations
Journal Article•
TL;DR: In this article, the authors evaluate what we have learned to date about the effects of privatization from the experiences during the last fifteen to twenty years in the postcommunist (transition) economies and, where relevant, China.
Abstract: In this paper, we evaluate what we have learned to date about the effects of privatization from the experiences during the last fifteen to twenty years in the postcommunist (transition) economies and, where relevant, China. We distinguish separately the impact of privatization on efficiency, profitability, revenues, and other indicators and distinguish between studies on the basis of their econometric methodology in order to focus attention on more credible results. The effect of privatization is mostly positive in Central Europe, but quantitatively smaller than that to foreign owners and greater in the later than earlier transition period. In the Commonwealth of Independent States, privatization to foreign owners yields a positive or insignificant effect while privatization to domestic owners generates a negative or insignificant effect. The available papers on China find diverse results, with the effect of nonstate ownership on total factor productivity being mostly positive but sometimes insignificant or negative.
585 citations
TL;DR: In this paper, the extent of political connections in newly privatized firms was investigated using a sample of 245 firms in 27 developing and 14 developed countries over the period 1980 to 2002, and 87 firms had a politician or an ex-politician on their board of directors.
535 citations
Posted Content•
TL;DR: In this article, the authors examined the evolution of cash dividends and share repurchases from 1989 to 2005 in the fifteen nations that were members of the European Union before May 2004, and found that the fraction of European firms paying dividends declines over this period, while total real dividends paid increase significantly.
Abstract: Using a database of over 4100 listed industrial companies, we examine the evolution of cash dividends and share repurchases from 1989 to 2005 in the fifteen nations that were members of the European Union before May 2004. As in the United States, the fraction of European firms paying dividends declines over this period, while total real dividends paid increase significantly. Most strikingly, share repurchases have surged in the EU, rising to over half the value of cash dividend payments in 2005. We also show that financial reporting frequency has steadily increased and is associated with higher payout, and that privatized companies account for almost one-quarter of total EU cash dividend payments but only two percent of the number of listed firms. Our logistic regression analyses of the likelihood to pay dividends and repurchase shares, and our panel data analyses of the payout amounts, verify that similar influences affect payout in the EU as in America, but that increasing fractions of retained earnings to total equity do not increase the likelihood of cash payouts, whereas company age does.
432 citations
Cites background from "The Financial Economics of Privatiz..."
...…United Kingdom during the 1980s and in continental Europe during the 1990s created a relatively small number of extremely large listed companies that almost always became the most valuable and most actively traded firms in every European stock market [see Jones, et al. (1999) and Megginson (2005)]....
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TL;DR: In this article, the authors compare the regulation around the world and discuss how this impacts the development of markets and investigate the signaling role played toward external investors by equity retention and social capital.
Abstract: This paper makes two contributions to research on the new entrepreneurial finance context of equity crowdfunding. First, we compare its regulation around the world and discuss how this impacts the development of markets. Second, we investigate the signaling role played toward external investors by equity retention and social capital. Using a sample of 271 projects listed on the UK platforms Crowdcube and Seedrs in the period 2011–2014, we find that campaigns launched by entrepreneurs (1) who sold smaller fraction of their companies at listing and (2) had more social capital had higher probabilities of success. Our results combine findings in classical entrepreneurial finance settings, like venture capital and IPOs, with evidence from other, non-equity crowdfunding markets.
399 citations