Ownership, exit and voice after mass privatization

Abstract

Exit (owners selling their shares) and voice (owners active in corporate activities) are important ingredients in the process by which mass privatization changes managerial behaviour in transition countries. We examine the structure of ownership and the extent of exit and voice in one such country, Mongolia. We document the size of ownership changes since privatization (through mergers, spin-offs, and stock sales) and examine which owners are changing in importance. We scrutinize enterprise governance, examining patterns of violations of company law and deviations from reasonable criteria for effective governance. We show that ownership changes and the quality of governance are correlated.JEL classification: P11, P21, O53, H70, H20.

Ownership as a Form of Corporate Governance

“…Such a response may occur in industries characterized by natural monopolies and in markets of public goods or among firms that are deemed too big to fail. The question of which firms and industries should have state ownership and which should compete in open markets occupies a vast literature of its own (Anderson et al, 1999). Although there remains some theoretical debate on the issue, most empirical studies highlight the problems of state ownership (D'Souza and Megginson, 1999;Shleifer, 1998).…”

Competition and privatization amidst weak institutions: evidence from Mongolia

“…We can, however, quickly dismiss one possible source of doubt: that outsiders might have accumulated shares in the better performing enterprises and voted their representatives on the board. First, Anderson et al [1999] show that outsiders were increasing their shareholdings of the relatively poorly performing enterprises when secondary trading in shares began. 11 Second, survey evidence shows that new shareholders were not the primary force behind the presence of outsiders on the board.…”

The rise and fall of employee ownership in Estonia, 1987–2001

“…Joint-stock companies with "fixed" equity capital do not need new owners for that purpose, but they may appreciate equity financing through share issues that improves their financial position. 7 The evidence includes the studies of Blasi, Kroumova and Kruse (1997) and Jones (1998) on Russia, Djankov (1999) and Estrin and Wright (1999) on CIS countries, Anderson, Korsun and Murrell (1999) for Mongolia, Jones and Mygind (1999) for Estonia, and Kozarzewski and Woodward (2001) on Poland. 8 In particular, we ignore here the substantial role foreigners have played in Estonian privatisation (Liuhto, 1995), small privatisation, entry of new firms and entrepreneurship (Liuhto, 1996), and the centralised privatisation programme (Terk, 2000).…”