How does privatization work?: ownership concentration and enterprise performance in Ukraine

How does privatization work?: ownership concentration and enterprise performance in Ukraine

Privatization which grants significant ownership stakes in Ukraine is preferable to dispersed ownership

This paper concludes that:

  • the effectiveness of mass privatisation methods that led to a dispersed post-privatisation ownership structure is questionable and suggests that privatization that grants signficant ownership stakes to single parties may have greater efficiency gains than privatization that disperses ownership
  • several years after privatisation ownership structures of individual enterprises, depends considerably on the privatization methods used
  • if due to political and equity considerations the governments in transition economies have to use privatization mechanisms leading to dispersed ownership, they should consider creating appropriate conditions for ownership reallocation to make privatization work
  • ownership concentration by foreign companies and banks is postively associated with enterprise performance. The authors of the article suggest that this may indicate that if foreign companies and banks indeed perform better as owners, perhaps the governments should consider attracting foreign investors for participation in the future privatizations and making institutional environment conducive to foreign investment
  • privatisation that grants ownership is stakes is preferable. This is based on the authors observation of the situation in Ukraine, where there is little protection of investors

This article's result may be generalisable to other CIS countries undergoing similar privatization processes. The article suggests that these countries possess similar institutional environments for arms lenght corporate governance [author]

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