Ownership Structure, Corporate Governance and Asset Prices. Evidence from the Czech Privatisation Program.
|Author:||Ing. Anton Marcinčin, PhD.|
|Year:||1999 - winter|
|Leaders:|| † prof. Ing. Michal Mejstřík CSc.
|Work type:|| Dissertations
|Awards and prizes:|
|Abstract:||Firms demand capital and suppliers of capital, i.e. firms owners, demand return on their sunk investment. If managers and owners shared the same objectives, or were able to specify perfect contracts, firms would have good access to capital and owners satisfying returns. In real word, however, managers and owners interests differ significantly, and contracts are imperfect. This is a potential source of company bad performance, low returns on equity participation and bad access to capital. Corporate governance mechanisms, that specify relations between managers and owners, set cost of capital and thus performance of firms and economy.
Theoretical literature tends to agree that ownership structure itself matters for corporate governance. This relation is very difficult to test empirically, because ownership structure does not change often enough to allow for testing. The opportunity for empirical research appeared with mass privatisation programs in Eastern Europe, where huge number of firms changed their ownership structures fairly quickly and in different directions. Therefore, in this thesis we decided to use data on the Czech Republic, which succeed to privatise thousands of firms during a five-year period. We use information from privatisation process and later generated information from stock market and about mutual funds.
The leading question of this thesis is relation between corporate governance and ownership structure. Specifically, we test whether: a) Ownership structure information is reflected in share prices, and consequently, whether b) it is a signal of people's expectation of better corporate governance rather than of insider information. We found a positive answer to both questions. Then we test actual performance. Two problems arose: It may be too early that new ownership structure would be reflected in improved performance, and that selection bias may be present. We solve selection bias and show corporate governance effects of voucher scheme. Worse-than-average firms were selected for full voucharisation, as we predicted, while better firms were voucharised only partially. Finally, we come to the question if investment privatisation funds were passive or active in exercising corporate control and look to data again. The answer is again positive.
The thesis consist of four essays and discussion. The first contains author's contribution in paper by Lastovicka, Marcincin and Mejstrik "Corporate Governance and Share Prices in Voucher Privatised Companies" which appeared as chapter in a book edited by Svejnar "The Czech Republic and Economic Transition in Eastern Europe" in 1995, and in revised version by Mejstrik, Marcincin and Lastovicka "Voucher Privatisation, Ownership Structures, and Emerging Capital Markets in the Czech Republic" which also appeared as a chapter in a book edited by Mejstrik "The Privatisation Process in East-Central Europe. Evolutionary Process of Czech Privatisation" in 1997. The second essay contains an updated version of paper by van Wijnbergen and Marcincin "Voucher Privatisation, Corporate Control and the Cost of Capital: An Analysis of the Czech Privatisation Programme" which was published as CEPR Discussion Paper in 1995 and later quoted for instance in Shleifer and Vishny's paper "A Survey of Corporate Governance" in the Jurnal of Finance in 1997, and in EBRD Transition report 1995. The third essay was recently published by Economics of Transition as "The Impact of Czech Privatisation Methods on Enterprise Performance Incorporating Initial Selection Bias Correction" by Marcincin and van Wijnbergen. Finally, the fourth essay is author's extension of his contribution to paper written with Shemetilo "Performance of the shares in the Investment Funds Portfolios and their strategy" and published by CERGE-EI as a Working Paper in 1995.
|Downloadable:|| Dissertation Thesis - Marcinčin