privatisation in developing countries a review of the evidence and the policy lessons privatisation is widely promoted as a means of improving economic performance in developing countries however the policy remains controversial and the relative roles of ownership and other structural changes such as competition and regulation in promoting economic performance remain uncertain this article reviews the main empirical evidence on the impact of privatisation on economic performance in developing economies the evidence suggests that if privatisation is to improve performance over the longer term it needs to be complemented by policies that promote competition and effective state regulation and that privatisation works best in developing countries when it is integrated into a broader process of structural reform

agriculture and the transition to the market agricultural sectors in eastern and central europe are large so that changes in producer prices farm employment and land ownership affect substantial numbers of people in the past food in the region was politicized for decades governments of eastern european countries and the ussr offered their citizens stable subsidized food prices and a steadily improving diet in an effort to demonstrate the superiority of communism over capitalism during the transition the context has changed but food remains politicized many consumers in the region are ill prepared to pay the real costs of food which are quite high the task of reducing those costs will be difficult involving restructuring of farms and fostering competition in processing and distribution management of the agricultural transition will affect the political sustainability of the process and influence agriculture s contribution to the growth of emerging market economies although the agricultural sector of eastern and central europe is large soviet agriculture dwarfs it in its impact on the region and the world a positive program to stop the decline in soviet agriculture could contribute to economic growth and political stability failure to remedy the fundamental flaws in soviet agriculture will speed the country s slide into poverty and ethnic turmoil and undermine the efforts of central and eastern europeans to succeed

a differential games solution to a model of competition between a thief and the police this paper contains an extension of an optimal control model considered by sethi sethi s p 1979 optimal pilfenng policies for dynamic continuous thieves management sci 25 6 june 535 542 to a differential game situation it is assumed that sethi s concave thief i e a risk averter plays against the police whose objective function incorporates convex costs of law enforcement a one shot utility at the time of arrest and a continuous utility or cost rate after the thief is arrested the probability that the thief is caught by time t is influenced not only by the pilfering rate as is the case in sethi s model but also by the instrumental variable of the police namely its rate of law enforcement our aim is to analyze noncooperative nash solutions of the differential game sketched above due to the special structure of the hamiltonians a system of two nonlinear differential equations for the control variables of both players can be derived the system is solved explicitly under special assumptions it is shown that the optimal rate of law enforcement of police increases monotonically whereas for the nash optimal pilfering rate three cases may be characterized in which increase decrease or constancy occur thus the nash optimal solutions show in each case monotonic behavior i e changes in trend never occur moreover the dependency of the terminal values of control can be described finally an interpretation of the model as market entrance game is sketched

tax smoothing and the cross country pattern of privatization summary privatization generally enhances firm level efficiency the impact of privatization on fiscal efficiency has however been overlooked using the tax smoothing ideas articulated by r barro 1979 on the determination of the public debt journal of political economy 87 940 971 and by h bohn 1990 tax smoothing with financial instruments american economic review 80 1217 1230 we argue that privatization may have an important impact on the welfare losses associated with tax collection this impact can either enhance or erode the efficiency of taxation we hypothesize that countries that benefit in terms of fiscal efficiency will privatize aggressively while countries that enjoy fiscal benefits as a result of state ownership will show little interest in privatization statistical tests are conducted that provide considerable support for the hypothesis

privatization public offerings and political objectives this paper empirically analyses the political and economic objectives underlying privatization on the stock market particularly the factors of sips underpricing are explained and the study analyses whether the change of political parties in government play a role on the issue the paper has two main findings first larger initial returns occurred in the early stages of privatization second the change of government from left wing to right wing did not lead to significantly higher levels of underpricing the results show that governments are quite pragmatic with respect to underpricing maximizing proceeds from sips shows to be more important than ideological differences between parties in government

determinants of privatization prices generating government revenue is a common objective in privatization this paper asks what determines privatization prices using firm level data for all 236 mexican companies privatized between 1983 and 1992 there are three main reasons why net prices auction prices net of the cost of prior restructuring measures are low averaging 54 cents per dollar of assets first privatization prices are very sensitive to the level of competition in the auction and restrictions often limited participation second the privatization process took too long and lengthier privatizations are associated with lower premiums third firm prior restructuring measures absorbed an average of 33 percent of the auction price most restructuring measures do not increase price and delay privatization further net prices would have increased by 71 cents per dollar of assets if the government had emphasized speed succeeding in divesting assets in one year less than the average and firing the ceo were the only restructuring step taken

incumbent employees resistance to implementing privatization policy abstract the recent anti privatization trend in latin america france and south africa is a reminder that employees resist privatization because pre privatization firms tend to be over manned and to pay excessive wages we study the effect of employees resistance on the successful implementation of privatization in a stylized model in which the government interacts with employees of an unknown type the analysis clarifies some of the difficulties associated with the implementation process furthermore although common sense dictates that the government negotiates with the employees before finding an outside buyer we show that sometimes it is better off contacting an investor first

tunneling or not the change of legal environment on the effect of post privatization performance motivated by hoff and stiglitz s am econ rev 94 3 753 763 2004 theory we examine empirically how the creation of rules of the game affect the behavior of economic agents in a transition economy using a sample of chinese state owned enterprises in which controlling ownership was transferred to private acquirers between 1994 and 2006 we find that the post privatization performance ppp of firms depends on institutional factors before 2003 we observe severe post privatization tunneling behaviors by acquirers and worse ppp however from 2003 when the state issued regulations against tunneling and strengthened enforcement the incidence of tunneling behaviors declined and ppp improved we find that better implementation of ownership transfer and longer prior experience of private acquirers are key factors that contribute to the improvement

the efficiency of state owned and privatized firms does ownership make a difference abstract this paper compares the pre and post privatization efficiency of a sample of state owned enterprises privatized in spain with the efficiency of their closest private competitors we perform a two stage double bootstrap data envelopment analysis model in the first stage the efficiency is estimated through a bootstrapped data envelopment analysis and then followed in the second stage by a bootstrapped truncated regression our results provide evidence that i there were no significant differences in efficiency between the state owned enterprises and their private counterparts before privatization and ii the efficiency of newly privatized firms significantly increased after their privatization while private competitors showed no significant improvement during the same post privatization period

brazilian privatization in the 1990s abstract this paper makes a partial assessment of the brazilian privatization program in the 1990s the article focuses mainly on the fiscal impact of asset sales which we argue has been relatively small we conclude that the failure of the governments attemps has reduced the fiscal benefits of privatization and inhibited the goverment s capacity to impose limits on buyers who have increased their market power through the acquisition of state owned enterprises in practice the main objective of the privatization program has been to highlight the commitment to market orieted reforms in a certain sense privatization has created its own logic beyond its original objectives

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

rate base selection and the structure of regulation this article investigates the role played by rate base valuation rules in the context of rate of return regulation it shows 1 that there is nothing inherently fair about any particular valuation rule 2 that properly interpreted rate bases represent promises of future returns 3 that valuation rules can be fairly selected from a very broad class and 4 that once this is recognized rate of return regulation represents a highly effective and flexible means of avoiding the dynamic consistency problems associated with repeated regulatory reviews in addition the article investigates the nature of optimal rate base valuation rules

privatization in latin america what does the evidence say privatization is under attack criticisms run from corrupt deals to abuse of market power and social welfare losses we evaluate the empirical record on privatization relying on recent comprehensive studies from latin america the paper presents four main results first the increased profitability of privatized firms is not explained by sample selection biases second in the quest to identify the sources of increased profitability after privatization we find little evidence that validates concerns of generalized market power abuses exploitation of workers and lack of fiscal benefits third the manner in which privatization is carried out matters transparency and homogeneity in procedures speed and limited restructuring prior to privatization lead to better outcomes and less room for corruption and discretion finally privatization s success is enhanced by two complementary policies deregulation or reregulation of industries previously shielded from competitive forces and an effective corporate governance framework that facilitates privatized firms access to capital at lower cost overall the empirical record shows that privatization leads to increased profitability and productivity firm restructuring fiscal benefits output growth and even quality improvements most cases of privatization failure can be linked to poor contract design opaque processes with heavy state involvement lack of reregulation and a poor corporate governance framework

privatization policy in an international oligopoly this paper studies privatization policy in an international oligopoly the argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than in greenfield fdi models since these profi ts hifts are partly paid for by the foreign firms in the bidding competition effects of local equity requirements trade and investment policies are also studied it is for instance shown that small local equity requirements are likely to be beneficial but large ones are counterproductive by preventing welfare enhancing foreign acquisitions

institutions and government controls abstract this paper develops a model of government policy toward industrial control and regulation that sheds light on the determinants of differential country experiences in terms of organizational arrangement and enterprise performance in contrast to the model developed by shleifer and vishny shleifer a vishny r w 1994 politicians and firms quarterly journal of economics 109 995 1025 shleifer a vishny r w 1998 the grabbing hand government pathologies and their cures harvard univ press cambridge ma which suggests that government controls over firms come about when politicians can use public funds to buyoff the managers and solicit their cooperation in politically motivated redistribution of rents the present shows that it may be the ability to use the government s regulatory powers at discretion that encourages politicians to impose controls on firms and redistribute their rents the model implies that the politicians appetite for intervention tends to be greater when the cost of collecting and using public funds is higher which is the opposite of what the shleifer vishny model predicts the present model helps explain the puzzling observation that countries with poor institutions are more likely to impose extensive controls on production and maintain large and inefficient public sectors the model also sheds light on a variety of other stylized facts and puzzles and offers new hypotheses to be tested

the impact of ownership on price setting in retail energy markets the german case abstract this paper analyzes whether public ownership has an impact on providers price setting under the assumption of more efficient energy provision which benefits customers a large number of former energy monopolists have been privatized in line with the liberalization of energy markets in germany at the end of the 1990s however current re municipalizations are justified by similar arguments in the public debate based on a dataset on the ownership structure of energy providers we find that public property or private property itself is not the decisive factor for lower retail and wholesale prices rather a high ownership concentration leads to low prices regardless of the type of owner as public investors often seek total ownership of a provider households which are less willing to switch benefit at least indirectly from public ownership tests for robustness of our results applying different owner and concentration measures confirm the results independently from the underlying estimation specification

the electoral consequences of the washington consensus this paper assesses how electoral outcomes in both presidential and legislative elections in latin america have been affected by the adoption of economic policies that seek to improve macroeconomic stability and facilitate the functioning of markets the database includes 17 latin american countries for the period 1985 2002 and a total of 66 presidential and 81 legislative elections the set of testable hypotheses is derived from a review of the literature and is structured around the hypothesis of economic voting it is found that i the incumbent s party is rewarded for reductions in the rate of inflation and to a lesser extent for increases in the rate of growth ii the more fragmented or ideologically polarized the party system the higher the electoral rewards of reducing the inflation rate or raising the economic growth rate iii voters care not only about economic outcomes but also about some of the policies adopted while the electorate seems blind to macroeconomic policies such as fiscal or exchange rate policies it is averse to pro market policies irrespective of their effects on growth or inflation and iv the electorate is more tolerant of pro market reforms when the incumbent s party has a more market oriented ideology these results suggest that reforming parties have paid a hefty price for the adoption of pro market reforms except when such reforms have been undertaken in conjunction with stabilization policies in high inflation economies

optimal cartel pricing in the presence of an antitrust authority the dynamic behavior of a price fixing cartel is explored when it is concerned about creating suspicions that a cartel has formed consistent with preceding static theories the cartel s steady state price is decreasing in the damage multiple and the probability of detection however contrary to those theories it is independent of the level of fixed fines it is also shown that the cartel prices higher when a more competitive benchmark price is used in calculating damages

share issue privatizations as financial means to political and economic ends abstract this study examines how political and economic factors affect the offer price share allocation and other terms governments choose when they privatize state owned enterprises via a public share offering using a 59 country sample of 630 share issue privatizations sips with total proceeds of over 446 billion during the period 1977 1997 we find that governments consistently underprice sip offers tilt their share allocation patterns to favour domestic investors impose control restrictions on privatized firms and typically use fixed price offers rather than book building or competitive tender offers all to further political and economic policy objectives

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

does privatization improve job satisfaction the case of ghana this paper analyzes the impacts of privatization in ghana on the basis of a survey of 300 workers in privatized and state owned enterprises the findings indicate a significant positive relationship between privatization and job satisfaction whereas monthly wage is an important determinant of job satisfaction in state owned enterprises education and the availability of training opportunities are strong determinants in privatized enterprises the study also shows that there exists a variety of instruments to implement a privatization program smoothly

optimal antitrust policy under different regimes of fines abstract this paper shows how antitrust laws against price fixing can be enforced efficiently in the presence of asymmetric information between the authorities and the industry and under different regimes of pecuniary punishment we consider two regimes of fines that are often used in practice the first involves a fine based on revenues of the industry while the second is related to the damage caused to consumers the analysis shows that since investigation is costly it is optimal from a welfare point of view to tolerate some degree of collusion in both cases comparing the deterrence levels we show that no regime is a priori better than the other in addition we show that for industries where the possibilities of collusion are small the first system dominates the second in terms of efficiency conversely for high possibilities of collusion the second system is better

interactions between investment timing and management effort under asymmetric information costs and benefits of privatized firms abstract in this paper we examine the interactions between investment timing and management effort in the presence of asymmetric information between the owner and the manager where the manager has an informational advantage we find that investment timing is later under asymmetric information than under full information implying a decrease in the value of equity option however in order to minimize any distortion under underinvestment management effort is greater under asymmetric information than under full information we show that there are trade offs in the efficiencies of investment timing and management effort under asymmetric information these results fit well with the findings of past empirical studies concerning the costs and benefits of privatized firms

defying the resource curse explaining successful state owned enterprises in rentier states the article explains how several gulf rentier monarchies have managed to create highly profitable and well managed state owned enterprises soe s confounding expectations of both general soe inefficiency and the particularly poor quality of rentier public sectors it argues that a combination of two factors explains the outcome the absence of a populist mobilizational history and substantive regime autonomy in economic policy making the author concludes that it is necessary to rethink the commonly accepted generalizations both about rentier states and arguably about public sectors in the developing world

the british electricity experiment the privatization of the electricity supply industry esi in britain which began 1990 is in itself an unremarkable event much of the esi is privately owned in several european countries and in the united states and the u k privatization program has embraced utilities since 1984 when british telecom was privatized the thing that is remarkable about recent policy toward the industry is the radical nature of the regulatory reform accompanying privatization a vertically integrated administered generation and transmission structure was replaced overnight on march 31 1990 by one that is deintegrated and market based generation and transmission have been separated and there has been an attempt to establish competition in generation a number of countries have been moving gradually in the direction of encouraging competition but nowhere else have such dramatic changes been implemented so quickly

the benefits of privatization evidence from mexico critics of privatization often argue that its benefits come at a high cost to society the authors test the validity of this criticism for mexico s privatization program one of the world s largest case by case programs assessing the performance of newly privatized firms in such areas as profitability and efficiency they find that these firms quickly close the gap with their peers in the private sector their findings suggest that the firms profit gains come from productivity gains 52 percent layoffs 33 percent and higher prices 15 percent

government s credit rating concerns and the evaluation of public projects we study how considerations regarding the credit rating of the government s debt affect privatization policy credit market discipline presses the government to put more weight on the monetary aspect of public projects relative to their social benefits as the anticipated income increases its creditors confidence in its ability to repay debt yet several informational problems undermine this discipline leading to a costly downgrading of the credit rating dynamic inconsistency occurs when the monetary to social benefi tt radeoff is made only after the credit market has priced government s debt such as in the decision of the toll on a road projects are operated with an excessive emphasis on social benefits adverse selection occurs when the government has private information regarding a prospective project s characteristics such as anticipated traffic project selection is tilted towards those with high social benefits and low monetary benefi ts we study the possible roles for privatization to alleviate these informational problems and evaluate the regimes with and without the option for privatization

moral judgment and causal attributions consequences of engaging in earnings management recent well publicized accounting scandals have shown that the penalties outsiders impose on those found culpable of earnings management can be severe however less is known about how colleagues within internal labor markets respond when they believe fellow managers have managed earnings designers of responsibility accounting systems need to understand the reputational costs managers impose on one another within internal labor markets in an experimental study 159 evening mba students were asked to assume the role of a manager in a company and respond to a scenario in which another manager the target manager has the opportunity to engage in earnings management participants provided causal attributions assessed the morality of the target manager and indicated whether they would change their judgments about the target manager s reputation the study manipulated three between subjects factors 1 whether the target manager chose to engage in earnings management 2 whether the company s budgetary control system was rigid or flexible and 3 whether the target manager s work history was average or above average we found that causal attributions are affected more by the budgetary systems when the target did not manage earnings than when the manager did we also found that morality judgments were significantly associated with the target manager s behavior but not with the budgetary system in addition participants judgments about the target manager s reputation were more strongly associated with morality judgments than with causal attributions we discuss implications of the role of reputation in management control systems design

ownership changes and access to external financing this paper examines access to external financing in the privatization context and provides new evidence on the effects of financing constraints on performance and investment ownership reforms increase firms reliance on external financing empirically performance and investment changes around ownership reforms are increasing in country level measures of access to credit the presence of a severe prior public financing constraint contributes to stronger investment growth after privatization privatized enterprises do not outperform publicly owned industries all else given our analyses rely on new international sector and firm level data and correct for potential endogeneity of ownership changes

from state to private ownership issues from strategic industries abstract this paper investigates the effects of privatization for a panel of 189 firms from strategic industries headquartered in 39 countries and privatized between 1984 and 2002 strategic firms can hardly be compared to manufacturing or competitive industries as they are generally under state monopoly and involve specific issues such as regulation political and institutional constraints we examine the change in ownership and postprivatization means of control by the government and assess whether positive changes in performance obtain in these particular industries that include firms from the financial mining steel telecommunications transportation utilities and oil sectors we document that governments continue to exert influence on former state owned firms after three years by retaining golden shares and or appointing politicians to key positions in the firm our multivariate results reveal a negative effect of state ownership on profitability and operating efficiency which the presence of a sound institutional and political environment moderates

endogenous asset ownership structures in deregulated markets abstract this paper determines the equilibrium ownership structure in an emerging market deregulated by a joint privatization and investment liberalization it is shown that bidding competition in the privatization stage is not sufficient for reaching an efficient equilibrium market structure competition in the ensuing entry stage is also required otherwise one firm can induce another to take the role of the weak firm in the subsequent product market competition by making concessions in the bidding in the privatization auction it is also shown that employment guarantees may help the buyer of the privatized firm abstain from investing and thus create a less competitive market structure

employment and wage effects of privatisation evidence from hungary romania russia and ukraine we use longitudinal methods and universal panel data on 30 000 initially state owned manufacturing firms in four transition economies to estimate the impacts of privatization on employment and wages the results in all four countries consistently reject job losses and they never imply large wage cuts from privatization to either foreign or domestic owners the domestic privatization estimates are close to zero for employment while for wages they are negative but small in magnitude estimated foreign privatization effects are nearly always positive and sometimes large for both outcome variables we find that the negligible consequences of domestic privatization result from effects on scale productivity and costs that are large but offsetting in hungary and romania and from small effects of all types in russia and ukraine the positive employment outcome of foreign ownership results from a substantial scaleexpansion effect that dominates the productivity improvement effect and the positive wage outcome from productivity improvement dominating the cost reduction effect

public private mixed delivery and information effects this paper analyses public private mixed delivery of essential public services under price regulation a private firm may have lower production costs and can potentially provide a performance benchmark for a public firm a public firm may offer higher quality service and can reveal the production cost of the private firm to the regulator however this paper shows that public private mixed delivery does not always dominate public delivery or private delivery mixed delivery is optimal only when i the cost uncertainty of the private firm is large ii the managerial incentive problem of the public firm is large and iii the performances of the public and private firms are highly correlated

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

moral reasoning and ethical climate not for profit vs for profit boards of directors utilizing rest s moral development and victor and cullen s ethical climate surveys we examine differences in moral reasoning and ethical climate between board members in the for profit and not for profit sectors six for profit corporations and seven not for profit corporations all with base operations in a major midwestern state participated in the study we find that profit and not for profit boards may not differ in moral reasoning but do exhibit different types of ethical climates we also find that for profit board members may utilize higher stages of reasoning a greater percentage of the time than not for profit directors in contrast the ethical climates of the two types of organizations are significantly different for profit companies had climates higher in egoism than did not for profit companies in addition not for profit firms reflected higher benevolence factors than for profit firms not forprofit organizations also had somewhat higher but not significantly different mean scores on the principle factor compared to the for profit organizations

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

ownership concentration in privatized firms the role of disclosure standards auditor choice and auditing infrastructure we rely on a unique data set to estimate the impact of disclosure standards and auditor related characteristics on ownership concentration in 190 privatized firms from 31 countries accounting transparency can help alleviate the agency conflict between minority investors and controlling shareholders which is evident in the extent of ownership concentration since the expropriation of corporate resources by insiders hinges on these private benefits remaining hidden after controlling for other country level and firm level determinants we find weak no evidence that extensive disclosure standards auditor choice reduce ownership concentration in contrast we provide strong robust evidence that ownership concentration is lower in countries with securities laws that specify a lower burden of proof in civil and criminal litigation against auditors consistent with ball s 2001 predictions collectively our research implies that minority investors worldwide value legal institutions that discipline auditors in the event of financial reporting failure over both the presence of a big five auditor and better disclosure standards

the anatomy of corporate fraud a comparative analysis of high profile american and european corporate scandals this paper presents a comparative analysis of three american enron worldcom and healthsouth and three european parmalat royal ahold and vivendi universal corporate failures the first part of the analysis is based on a theoretical framework including six areas of ethical climate tone at the top bubble economy and market pressure fraudulent financial reporting accountability control auditing and governance and management compensation the second and third parts consider the analysis of these cases from fraud perspective and in terms of firm specific characteristics ownership structure and environmental context coverage in media and academic literature regulatory and corporate governance frameworks the research analyses shed light on the fact that despite major differences between europe and u s in terms of political institutions laws and regulations as well as managerial practices there are significant similarities between six groups the analysis also demonstrates that the ethical dilemma has been coupled with ineffective boards inefficient corporate governance and control mechanisms distorted incentive schemes accounting irregularities failure of auditors dominant ceos dysfunctional management behavior and the lack of a sound ethical tone at the top significant similarities were also observed in the analysis from the fraud triangle perspective however there are several major differences between the six corporate failure cases particularly with regard to ownership structure coverage in media and legal regulatory and governance frameworks this research study may have several academic and practical contributions particularly because of multidisciplinary international features and comparative analyses used in the paper

ownership and firm innovation in a transition economy evidence from china we examine innovation performance of firms in a transition economy from an ownership perspective we focus specifically on the relationship between ownership structures and firm innovation performance drawing on data from 548 chinese firms we find volume of patent registration to be most strongly influenced by foreign ownership in the firm along with firm affiliation within a business group the influence of state and institutional ownership on innovation performance is positive but lagged contrary to expectations insider ownership leads to lower innovation performance and concentrated ownership has no significant impact our study has two principal contributions firstly we utilize a comprehensive treatment of ownership characteristics overcoming weakness in previous studies that have used a more narrow focus on ownership type secondly we contribute to understanding of how firms in transition economies build indigenous capabilities for innovation by drawing attention to the interplay of foreign and domestic control of agents innovation

profiting from government stakes in a command economy evidence from chinese asset sales abstract we examine the market response to an unexpected announcement of the sale of government owned shares in china in contrast to earlier work we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect from the policy s cancellation we suggest that this results from the absence of a chinese political transition to accompany economic reforms so that the benefits of political ties outweigh the efficiency costs of government shareholdings companies managed by former government officials have positive abnormal returns suggesting that personal ties can substitute for government ownership as a source of connections

the pitfalls of water privatization failure and reform in malaysia summary this paper examines why private participation in infrastructure ppi in water continues to be promoted despite poor results in developing countries it argues that the main characteristics of infrastructure discourage private investment and necessitate state subsidies which dilute private risks and incentives and facilitate rent seeking as a result ppi is characterized by public financing selective private investments and inconclusive efficiency gains this is reflected globally and in malaysia where ppi continues to be promoted because it provides captive rents the political factors that drive ppi invariably compromise institutional solutions as malaysia s water sector reforms illustrate

determination of optimal penalties for antitrust violations in a dynamic setting we analyze a differential game describing the interactions between a firm that might be violating competition law and the antitrust authority the objective of the authority is to minimize social costs loss in consumer surplus induced by an increase in prices above marginal costs it turns out that the penalty schemes which are used now in eu and us legislation appear not to be as efficient as desired from the point of view of minimization of consumer loss from price fixing activities of the firm in particular we prove that full compliance behavior is not sustainable as a nash equilibrium in markovian strategies over the whole planning period and moreover that it will never arise as the long run steady state equilibrium of the model we also investigate the question which penalty system enables us to completely deter cartel formation in a dynamic setting we found that this socially desirable outcome can be achieved in case the penalty is an increasing function of the degree of offence and is negatively related to the probability of law enforcement

an econometric analysis of telecom competition privatization and regulation in africa and latin america this paper explores the effects of privatization competition and regulation on telecommunications performance in 30 african and latin american countries from 1984 through 1997 fixed effects regressions reveal that competition measured by mobile operators not owned by the incumbent is correlated with increases in the per capita number of mainlines payphones and connection capacity and with decreases in the price of local calls privatization combined with an independent regulator is positively correlated with telecom performance measures privatization alone however is associated with few benefits and is negatively correlated with connection capacity

financing infrastructure in developing countries this article develops a theoretical framework to analyse options for financing infrastructure in developing countries we build a basic model that gives motivations for using a combination of public finance private debt and private equity the model is then extended in a number of ways to examine factors that are important for developing countries we focus in particular on key institutional weaknesses that are often important for infrastructure investment overall we show that such weaknesses can be key in determining financing choices but that they do not all push in the same direction financing schemes must therefore be adapted to consider the institutional limitations that are most pertinent in any given context

privatization benefits in eastern europe abstract we document changes in the performance of over 6000 privatized and state owned manufacturing enterprises in seven eastern european countries over the initial transition period we find that privatization is associated with significant increases in sales revenues and labor productivity and to a lesser extent with fewer job losses the positive effect of privatization is stronger in economic magnitude and statistical significance as the time elapsed since privatization increases enterprises privatized for less than 2 years have labor productivity growth similar to that of state owned enterprises in contrast enterprises privatized for 3 or more years significantly outperform state owned enterprises the results are robust to the use of alternative econometric specifications fixed effects cluster effects and random effects and survive in six of the seven individual country samples the exceptions being hungary for sales growth and romania for labor productivity growth

the financial and operating performance of privatized firms during the 1990s this study compares the pre and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996 we document significant increases in profitability output operating efficiency and dividend payments and significant decreases in leverage ratios for our full sample of firms after privatization and for most subsamples examined capital expenditures increase significantly in absolute terms but not relative to sales employment declines but insignificantly combined with results from two previous directly comparable studies these findings strongly suggest that privatization yields significant performance improvements during the past two decades the privatization of state owned enterprises has moved from being a radical almost desperate policy initiative of the thatcher government in britain to being an accepted economic policy for governments of all ideological stripes according to gibbon 1998 860 billion has been raised by governments worldwide through privatizations with the bulk of this total coming since 1987 and at least one commentator roche 1996 predicts that no less than 6 trillion will be raised through privatizations over the next two decades in 1997 alone sales of public enterprises totaled a record 161 billion worldwide with more than 110 billion of the total coming during the second half of the year and 1998 s total of almost 140 billion indicates that the pace shows no sign of slackening as we approach a new millennium

economic perspectives on privatization despite being one of the most fundamental issues in political economy the question of the appropriate boundary between public and private enterprise received relatively little attention in mainstream economic analysis until quite recently in the 1980s however programs of ownership reform were started in many developed and developing countries dramatic though some of these policies have been they are likely to be overshadowed in the 1990s by even greater privatization in the reforming socialist economies the opening sections of this paper are organized around three broad and interrelated questions how does ownership matter for the efficiency of enterprise performance what is the role for privatization in financing public debts and deficits what are the distributional and political implications of privatization finally we examine privatization in practice in three countries britain chile and poland

the performance of privatised enterprises in developing countries abstract privatisation has been advocated as the predominant way to solve the problems facing ailing public enterprises in developing countries despite this the policy remains controversial the available empirical evidence on the operational and financial performance of enterprises after privatisation has often painted a rosy picture this paper reassesses the situation using a larger sample of enterprises and a comparative perspective between privatised utilities non utilities and private enterprises that have never been state owned the results of our analysis point to there being differences in the performance across the three groups of enterprises and in particular to a deterioration in performance among privatised utilities this suggests that the earlier optimism over the efficacy of privatisation may have been premature

the performance of privatized firms in the czech republic abstract with the growing importance of privatizations as a part of government policy most empirical studies of these privatizations conclude that firm performance immediately improves following privatization privatization has been the most important part of the transition from the centrally planned economies of central and eastern europe and has a larger impact on those economies than privatizations in other countries however few studies have looked at the performance of firms following mass privatization this study uses 453 separate firms 101 firms privatized in both waves for a total of 554 observations in the first and second waves of czech voucher privatization using methodology from previous studies we find that while the overall effects from privatization are positive the effects vary by privatization wave size and industry firms privatized in the first wave performed worse decline in performance following privatization than firms privatized in the second wave we also fail to find ownership concentration or debt as an important factor in restructuring the firm i believe that the results are consistent with two hypotheses first economic and political structure surrounding the privatization waves plays an important part in the success of privatization stable environments both political and economic help privatized firms restructure and improve operating performance as well as attract foreign investors and capital even in less developed countries but in transitional economies undergoing mass privatization in rapidly changing and developing economic and political environments hinder firms from restructuring and improving performance following privatization results are also consistent with the hypothesis that firms with a longer preparation period prior to privatization an implicit seasoning improve performance following privatization

full privatization through controlling rights transfer in china the extent of its success this article investigates the effect of the second step of privatization in china which is full privatization through controlling rights transfer after share issue partial privatization it finds that fully privatized firms perform worse than state controlled enterprises expropriation by private block shareholders is greater than that by state block shareholders furthermore increase in expropriation is negatively related to performance change the results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal system they also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization

a dynamic model of privatization with endogenous post privatization performance this paper presents a dynamic model of privatization driven by improved institutional protection of private property rights and constrained by the buyer s financial constraints government ownership is more efficient than private ownership when private property rights are insecure improved institutional protection of property rights over time creates the need to privatize the buyer s financial constraints affect the timing of privatization causing the firm s post privatization performance either to improve or to deteriorate in the short run financial constraints also have the possibility of inducing an underpricing phenomenon during privatization where the firm is priced below both what the buyer is willing to pay and the buyer s ability to pay faster institutional development calls for earlier privatization but it also has the potential to either create or exacerbate deadweight losses associated with inefficient privatization a host of empirically testable implications are derived copyright wiley blackwell

how to make the fine fit the corporate crime an analysis of static and dynamic optimal punishment theories abstract this paper investigates dynamic optimal punishment theory previous studies of optimal punishment theory have all been confined to a static setup the most celebrated result in the literature is becker s 1968 optimal punishment theory which states that the optimal fine should be a multiple of the social cost of the crime i show that this result is no longer valid in a dynamic environment the implications of the dynamic model of optimal punishment are found to be strikingly different from those of the static model

partial privatization and firm performance most privatization programs begin with a period of partial privatization in which only non controlling shares of firms are sold on the stock market since management control is not transferred to private owners it is widely contended that partial privatization has little impact this perspective ignores the role that the stock market can play in monitoring and rewarding managerial performance even when the government remains the controlling owner using data on indian state owned enterprises we find that partial privatization has a positive impact on profitability productivity and investment widespread privatization in recent decades has generated a large empirical literature concerning the effect of ownership on firm performance most studies find that privatization has a positive impact on the profitability and efficiency of firms see megginson and netter 2001 for a recent survey 1 the firms in these studies have had a majority of their assets privatized and control rights have been transferred from the government to private owners surprisingly little is known about the effect of partial privatization where the government remains the controlling owner this paper seeks to address this gap in the literature by investigating whether the performance of state owned enterprises in india is affected by the sale of non controlling equity stakes on the stock market

cartel pricing dynamics in the presence of an antitrust authority cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed balancing concerns about maintaining the stability of the cartel with those of avoiding detection the cartel may either i gradually raise price to its steady state level or ii gradually raise price and then have it decline to its steady state level antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices

cartel pricing dynamics with cost variability and endogenous buyer detection this paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel buyers are assumed to become suspicious when observed prices are anomalous we find that the cartel price path is comprised of two phases during the transitional phase price is generally rising and relatively unresponsive to cost shocks during the stationary phase price responds to cost but is much less sensitive than under non collusion or simple monopoly the length of the transition phase is decreasing in the variance of cost shocks it is also shown that the cartel price path may overshoot its long run level so that price converges from above

motivating wealth constrained actors we examine how owners of productive resources e g public enterprises or financial capital optimally allocate their resources among wealth constrained operators of unknown ability optimal allocations exhibit 1 shared enterprise profit the resource owner always shares the operator s profit 2 dispersed enterprise ownership resources are widely distributed among operators of varying ability 3 limited benefits of competition the owner may not benefit from increased competition for the resource and sometimes 4 diluted incentives for the most capable more capable operators receive smaller shares of the returns they generate implications for privatizations and venture capital arrangements are explored

priorities and sequencing in privatization evidence from czech firm panel data abstract while privatization of state owned enterprises has been one of the most important aspects of the economic transition from a centrally planned to a market system no transition economy has privatized all its firms simultaneously this raises the question of whether governments privatize firms strategically in this paper we examine the determinants of the sequencing of privatization to obtain testable predictions about the factors that may affect sequencing we investigate the following competing government objectives i maximizing efficiency through resource allocation ii maximizing public goodwill from the free transfers of shares to the public iii minimizing political costs iv maximizing efficiency through information gains and v maximizing privatization revenues next we use firm level data from the czech republic to test the competing predictions about the sequencing of privatization consistent with the hypotheses of a government priority on revenues and public goodwill we find strong evidence that more profitable firms were privatized first the sequencing of privatization is also consistent with maximizing efficiency through information gains our results indicate that many empirical studies of the effects of privatization on firm performance suffer from a selection bias

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

privatization and the economic performance of irish sugar greencore as one of ireland s largest agribusiness companies the irish sugar company played a key role in the country s economic development in the twentieth century the company was privatized in 1991 under the new name greencore and has since transformed from a largely commodity based agribusiness into an international convenience food company this article analyses the financial and economic performance of the company in the 10 years before and after privatization it finds that the change from public to private ownership was not strongly associated with improved financial performance and productivity as the company had experienced rapid growth and improvement in the pre privatization period these findings run counter to perspectives such as public choice theory that suggest a positive relationship between privatization and company performance performance in the post privatization period was strongly influenced by greater exposure to market forces in the company s expanding food division however it is sur

antitrust penalties and the implications of empirical evidence on cartel overcharges research for this paper was supported by a grant from the economic and social research council res 062 23 2211

do privatized banks in middle and low income countries perform better than rival banks an intra industry analysis of bank privatization abstract this paper presents a comprehensive analysis of the pre and post privatization operating performance and stock market performance of privatized banks and their rivals in middle and low income countries first we find that privatization announcements elicit negative abnormal returns for rival banks the effects are more pronounced for subsequent tranche sales where the proportion of government ownership in the privatized bank is reduced second we observe that the privatized banks underperformed the benchmark index in the long run investors who bought shares of the privatized banks on the first day of trading and held them for 5 years instead of investing in the market index lost 24 of their wealth the underperformance is consistent with the negative long run returns that have been documented for initial public offerings third we document marginal improvements in the post privatization operating performance of the privatized banks though the privatized banks in middle and low income countries are better capitalized than rival banks they carry higher problem loans and are overstaffed relative to other private banks in the post privatization period since most of the sample firms are partially privatized we submit that perhaps the continued government ownership of the privatized banks might have hindered managers ability to restructure the firms

intra industry effects of bank privatization a clinical analysis of the privatization of the commonwealth bank of australia abstract this paper provides a comprehensive analysis of the effects of the privatization of the commonwealth bank of australia cba on the bank s performance and that of the rival banks first we find that the major rival banks reacted negatively to the privatization announcements although the initial partial privatization and the final full privatization announcements elicited stronger stock market reaction from the rival banks second we find that the cba s long term stock market performance improved markedly as the proportion of government ownership decreased with the bank s cumulative abnormal returns being 50 more than those of its rivals three years after the bank had been fully privatized also the cba has not only been very efficient in reducing cost and improving its profitability in the post privatization period it has outperformed its rivals on almost all the operating performance measures and has become the most profitable bank in australia a particularly noteworthy finding is that the improvements in the cba s operating and stock market performance and the rival banks reaction to the partial and full privatization announcements were strongest after the bank had been fully privatized the implication of the results for governments contemplating privatization of state owned enterprises is that full privatization is necessary in order to achieve strong gains in efficiency profitability and stock market performance

privatization strategic foreign direct investment and host country welfare recent evidence shows that developing countries and transition economies are increasingly privatizing their public firms and at the same time experiencing rapid growth of inward foreign direct investment fdi we show that there is a two way causality between privatization and greenfield fdi privatization increases the incentive for fdi which in turn increases the incentive for privatization compared to the situation of no fdi the optimal degree of privatization depends on the cost difference of the firms and on the foreign firm s mode of entry

public offerings of state owned and privately owned enterprises an international comparison we compare initial offer prices in privatizations to initial prices in public offerings of private companies the evidence indicates that government officials in the united kingdom underprice ipos significantly more than their private company counterparts in canada and malaysia however the opposite is true there does not appear to be a general tendency for privatizations to be underpriced to a greater degree than private company ipos we provide additional evidence on the determinants of privatization initial returns our findings indicate that initial returns are significantly higher in relatively primitive capital markets and for privatized companies in regulated industries

privatization and bank performance in developing countries abstract we examine the postprivatization performance of 81 banks from 22 developing countries our results suggest that i on average banks chosen for privatization have a lower economic efficiency and a lower solvency than banks kept under government ownership ii in the postprivatization period profitability increases but depending on the type of owner efficiency risk exposure and capitalization may worsen or improve however iii over time privatization yields significant improvements in economic efficiency and credit risk exposure iv we also find that newly privatized banks that are controlled by local industrial groups become more exposed to credit risk and interest rate risk after privatization

the financial and operating performance of newly privatized firms evidence from developing countries this paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992 we use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures both unadjusted and market adjusted results show significant increases in profitability operating efficiency capital investment spending output employment level and dividends we also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios our results are generally robust when we partition our data into various subsamples

market socialism a case for rejuvenation in this paper we will outline a feasible economic mechanism of competitive socialism our claim is that competitive markets are necessary to achieve an efficient and vigorous economy but that full scale private ownership is not necessary for the successful operation of competition and markets contrary to popular impression this claim has not yet been disproved by either history or economic theory it is the failure of both the political right and the left to disentangle the concepts of private ownership and the competitive market that has led to the premature obituaries for socialism in the second section we look at the question of the soft budget constraint as an agency problem under market socialism we then propose two variants of a bank centric system of insider monitoring as a viable solution to the agency problem the next section discusses the essential problem of political accountability and the difficulty of credible pre commitment in avoiding the soft budget constraint problem and suggests ways of minimizing this problem in our proposed system we then conclude by addressing some of the other standard objections to a proposal for market socialism

privatization not the only answer abstract governments in many developing countries created state owned enterprises soes to produce goods or provide services the private sector seemed unwilling or unable to offer in many cases soes have turned out to be problem children at best inefficient and at worst unable to fulfill their original functions now the recommended solution to the problem of state owned enterprises is privatization but privatization is no more a solution to the problems of soes than soes were a solution to the problems they were created to solve the problem of soes is not ownership but rather a lack of explicit goals and objectives and an absence of organization cultures and systems that support and encourage fulfillment of those goals and objectives in some circumstances privatization may aid in fulfillment of an enterprise s goals and objectives because of the culture and systems it fosters in other cases not

factors influencing the privatisation of urban solid waste collection in spain this paper analyses some of the organisational aspects of urban solid waste collection it starts by discussing some of the theoretical issues of contracting out then an explanatory model is spec

varieties of capitalism and the internationalization of state owned enterprises this article sheds light on how the internationalization of state owned enterprises is influenced by the state involvement in ownership and by the home country s institutional settings integrating international business literature with the debate on the varieties of capitalism we contend that state dominated enterprises internationalize more less than privately owned enterprises in coordinated liberal market economies whereas they exhibit an inconstant behavior in state influenced market economies our analysis on a sample of enterprises pertaining to 20 oecd countries supports our hypotheses this article adds to studies on the influence of institutions on firms internationalization and has implications for both managers and policymakers

when do international human capital enhancing practices benefit the bottom line an ability motivation and opportunity perspective we study the conditions under which firms can capitalize on their international human capital ihc using the ability motivation opportunity amo perspective we conceptualize ihc as ability collaborative climate as motivation and the firm s level of internationalization as opportunity we test three alternative amo models the additive model main effect the combinative model two way interactions and the multiplicative model a three way interaction using a cross industry sample of south korean firms we find support for the multiplicative model specifically the relationship between ihc enhancement practices and firm performance is significant and positive only when both collaborative climate and internationalization are high

privatization and economic growth an empirical investigation from a sample of developing market economies this paper explores the economic determinants of privatization programmes and the macroeconomic impact of this institutional reform on the growth rate of the gdp a sample of thirty five developing market economies is considered over the 1988 92 period probit and tobit models are used to identify the determinants of successful privatization programmes then regressions are run where probabilities probit and expected values tobit are successively included as additional regressors beside the potential influence of other economic policy variables a significant positive effect is highlighted giving evidence of the importance of divestiture the economic effect is found to be stronger when this institutional reform took place in industry or infrastructure

privatization financial development property rights and growth abstract this study analyzes how prevailing institutional arrangements i e property rights contracting rights political institutions and corporate governance practices affect privatized firms performance capital markets development and economic growth most of the studies surveyed show that privatization enhances privatized firms performance efficiency and profitability which percolates to economic growth privatized firms performed better in countries with better regulatory and legal frameworks partial privatization may be beneficial in countries with weak institutions namely the french civil law countries the stronger the economic and the governing institutions the easier it is for privatized firms to thrive and contribute to economic growth overall privatization allows firms to achieve improved efficiency while driving the development of the financial sector

privatization and foreign competition abstract this paper determines the equilibrium market structure in an international oligopoly where a state enterprise is sold at an auction the paper suggests that high greenfield costs and high trade costs do not necessarily induce foreign acquisitions in privatizations despite the fact that foreign firms would gain considerably from acquiring in such situations the reason is that domestic firms can then prevent foreign firms from becoming strong local competitors and thus their willingness to pay for the state assets is high

optimal magnitude and probability of fines abstract the economic literature on crime and punishment focuses on the trade off between probability and severity of punishment and suggests that detection probability and fines are substitutes in this paper it is shown that in the presence of substantial underdeterrence caused by costly detection and punishment these instruments may become complements when offenders are poor the deterrent value of monetary sanctions is low thus the government does not invest a lot in detection if offenders are rich however the deterrent value of monetary sanctions is high so it is more profitable to prosecute them