Ebook Ownership Structure, Corporate Governance, and Enterprise Performance: Empirical Results for Ukraine
In earlier studies, the factors exerting a positive effect on enterprise restructuring in transition economies ownership emerged, besides competition and hard budget constraints, as a decisive determinant. The focus in these studies was directed mainly at the dichotomization into state versus private ownership. Privatization was generally found to have had a beneficial effect on the restructuring measures of former State Owned Enterprises (SOEs) and their performance [Megginson and Netter, 2001; Djankov and Murrell, 2002]. One may question whether and how the ownership structure affects the performance of enterprises in transition.
Different types of owners (insiders versus outsiders or concentrated versus dispersed owners) may differ in their impact on enterprise performance in transition since the ownership structures created in the privatization process have not yet adjusted themselves equally according to the corporate governance requirements for value maximizing management of the enterprises. Ownership structure matters because it contributes to the solution of corporate governance problems.
In this paper, the findings are reported about the effect of ownership structure on performance from a survey of 202 medium and large industrial firms from four regions in Ukraine. In the two best known studies on enterprise performance, corporate governance and ownership in Ukraine [Estrin and Rosevear, 1999 a, b], no positive performance effects from outsider (including foreign) ownership were detected.
Rather, restructuring improvements were related to insider ownership, while the apparent failure of outsider ownership seemed hard to explain. In this paper, the author draws on the view, emphasized by Nuti [1997], that corporate governance is not just confined to the principals agent problem of monitoring and controlling the management in order to ensure value maximization in the interest of shareholders, but also involves the solution of principals principals problem of conflict of interest between shareholding stakeholders in the firm and pure shareholders. This perspective on the corporate governance problem implies the hypothesis of a non monotonic relationship between performance and the size of shareholding by stakeholders. The aim of this paper is to test this hypothesis.
The next section of the paper delineates the two aspects of the corporate governance problem relevant for enterprises in transition. Then, data are briefly described. The following section describes and interprets the results from the regression analysis in which significantly positive non monotonic impacts of manager, worker, and in particular, foreign ownership on performance measured by sales per employee is found.
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