BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 7/2003:
Choice of ownership structure and firm performance: Evidence from Estonia
Derek C. Jones ()
, Panu Kalmi ()
and Niels Mygind ()
Abstract: In this paper we use rich panel data for a representative
sample of Estonian enterprises to analyse diverse issues related to the
determinants of ownership structures and ownership changes after
privatisation. A key focus is to determine whether ownership changes are
related to economic efficiency. While employee owned firms are found to be
much more prone than other firms to switch ownership categories, often
“employee owned” firms remain “insider-owned” as ownership passes from
current employees to managers and former employees. Logit analyses of the
determinants of ownership structures and ownership changes provides mixed
support for several hypotheses. As predicted: (i) wealth and resource
constraints play a crucial role in the determination of ownership, with
foreigners buying firms with the highest equity levels and insiders buying
firms with the lowest equity valuations; (ii) risk aversion explains
subsequent ownership changes, especially away from employee ownership;
(iii) allocation of ownership depends on the pre-privatisation origin and
location of the firm, and these factors also influence subsequent ownership
changes. Finally we compare our findings with those achieved by using more
conventional approaches to analyze efficiency that use very similar data.
Reassuringly the evidence presented in this paper is consistent with the
view that efficiency considerations drive ownership changes (while earlier
analysis for Estonia and for many other transition economies has identified
the impact of ownership on economic performance.) However, the findings in
this paper also establish that there are important influences besides
economic efficiency that affect enterprise ownership and ownership
changes.
Keywords: privatisation; ownership change; employee ownership; transition economies; Estonia; (follow links to similar papers)
JEL-Codes: G30; J50; P20; P30; (follow links to similar papers)
43 pages, May 27, 2003
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