This paper was developed with financial support from the SBF Bourse de Paris and the New York Stock Exchange, and the assistance of George Sofianos, Bill Tschirhart, and Didier Davidoff is gratefully acknowledged. We appreciate comments received on this paper from Anthony Boardman, Bernardo Bortolotti, Narjess Boubakri, JeanClaude Cosset, Kathy Dewenter, Alexander Dyck, Ivan Ivanov, Ranko Jelic, Claude Laurin, Marc Lipson, Luis Lopez-Calva, John McMillan (the editor), Harold Mulherin, Rob Nash, John Nellis, David Newberry, David Parker, Enrico Perotti, Annette Poulsen, Ravi Ramamurti, Susan Rose-Ackerman, Nemat Shafik, Mary Shirley, Aidan Vining and three anonymous referees. Additionally, we appreciate comments received from participants at the NYSE/Paris Bourse Global Equity Markets conference (Paris, December 1998), the Harvard Institute for International Development Privatization Workshop (June 2000), the International Federation of Stock Exchanges' Third Global Emerging Markets Conference (Istanbul, April 2000), four World Bank and/or International Finance Corporation meetings, two OECD conferences (Paris and Beijing), the 1999 Conference on Privatization and the Kuwaiti Economy in the Next Century, the 1998 Financial Management Association meeting, the 1999 European Financial Management Association meeting, the Fondazione ENI Enrico Mattei (FFEM), the Swiss Banking Institute and Credit Suisse, and seminars at the City University Business School (London), London Guildhall University and the University of Oklahoma. All remaining errors are the authors' alone. Please address correspondence to: William L. Megginson Price College of Business 307 West Brooks, 205A Adams Hall The University of Oklahoma Norman, OK 73019-4005 Tel: (405) 325-2058; Fax: (405) 325-1957 e-mail:...

by We test several propositions derived by Shleifer and Vishny (1994, 1996) about the effects of privatization and stabilization (hard budget constraints) on enterprise behavior. We document the changes in financing, employment, and operating efficiency that occur in over 6,300 manufacturing enterprises in seven Central

Most of the existing evidence on the effectiveness of large shareholders in corporate governance has been restricted to a handful of developed countries, notably the UK, US, Germany and Japan. This paper provides evidence on the role of large shareholders in monitoring company value from a developing and emerging economy, India, whose corporate governance system is a hybrid of the outsider-dominated market-based systems of the UK and the US, and the insider-dominated bankbased systems of Germany and Japan. The picture of large-shareholder monitoring that emerges from our case study of Indian corporates is a mixed one. Like many of the existing studies, while we find blockholdings by directors to increase company value after a certain level of holdings, we find no evidence that institutional investors, typically mutual funds, are active in governance. We find support for the efficiency of the German/Japanese bank-based model of governance; our results suggest that lending institutions start monitoring the company effectively once they have substantial equity holdings in the company and that this monitoring is reinforced by the extent of debt holdings by these institutions. Our analysis also highlights that foreign equity ownership has a beneficial effect on company value. In general, our analysis supports the view emerging from developed country

This paper uses a new dataset to examine the issue of how the design of privatization affects outcomes. Prior studies of Czech privatization have focused largely on how the widespread distribution of shares through vouchers may have motivated the new owners to strip assets from privatized firms. We find evidence for static asset stripping, but also for what Akerlof and Romer (1993) call looting borrowing heavily with no intent to repay in order to use the loans for private purposes. This occurred because the larger privatized companies had privileged access to credit from state controlled banks that had little incentive to enforce debt contracts. This finding has significant policy implications, namely that financial incentives and regulation are as important as ownership structure in privatization design. 1.

Abstract. Why were state-owned firms so common in the past, even in Western countries, and why were many of them privatized during the past two decades? Some recent papers argue that through state ownership the government can avoid the distortions to managerial incentives created by the corporate income tax. When the corporate tax rate is high enough, state ownership may be less inefficient than private ownership. If this argument were right, then the capital intensity of state-owned firms should fall with privatization. However, the data show instead that firms lay off a sizable fraction of their work force when they are privatized, suggesting that state firms are unusually labor intensive. This paper proposes an explanation for these observations. It argues to begin with that the government can use cheap loans from state-owned banks rather than state ownership of firms more generally to maintain the capital stock at an efficient level, in spite of a high corporate tax rate. With state banks, therefore, there is no reason to expect that state-owned firms will be more capital intensive than equivalent privately owned firms. The paper then argues that many other distortions to a firm’s incentives, e.g. the minimum wage and unemployment insurance programs, result in private firms employing too few workers, and particularly too few low-skilled workers. State-owned firms can then compensate for the resulting misallocations by hiring relatively more low-skilled workers than would an equivalent privately owned firm.

“If you think privatization is corrupt, try without it.”

This study explores the differences in pollution control performance of industries with different types of ownership in China -- State owned (SOE), collectively or community owned (COE), privately owned (POE), foreign directly invested (FDI) companies as well as joint ventures. A survey was conducted of about 1000 industrial firms in three provinces of China and detailed firm- level information in the year of 1999 was obtained. An analysis was performed on the differences between firms in receiving and reacting to environmental regulatory enforcement, community pressure, environmental services as well as in firm's internal environmental management among the different types of ownership. Econometric analyses were also conducted on the determinants of pollution discharge performance. The results show that FDIs and COEs have better environmental performances in terms of water pollution discharge intensity, while SOEs and POEs in China are the worst performers. The results also suggest that COEs in China do internalize environmental externalities. JEL Code: L21, Q28 Key words : Ownership, Regulation, Externality, Environmental Performance, China I.

additional support for Roman Frydman's research. None of these institution are responsible for opinions expressed in this paper. The authors would like to thank Joel Turkewitz for his contributions to the design and implementation of the survey instrument, and Mihaela Popescu for her extraordinary assistance in the analysis of the data. The authors also thank Sarbajit Sinha for computer support in the initial stages of research. 2

by the Economics Education and Research Consortium All opinions expressed here are those of the author and not those of the Economics Education and Research Consortium Research dissemination by the EERC may include views on policy, but the EERC itself takes no institutional policy positions

1. Privatization--Bolivia. 2. Manufacturing industries--Bolivia. I. Machicado, Carlos