Ownership Structure as a Determinant of Firm Value: Evidence from Newly Privatized Czech Firms

Posted: 22 Aug 2001

See all articles by Anil K. Makhija

Anil K. Makhija

Ohio State University (OSU) - Department of Finance

Michael Spiro

University of Pittsburgh - Finance Group

Abstract

Using a sample of 988 newly privatized Czech firms, with part of the ownership structure exogenously determined prior to voucher privatization, we find that share values are positively related with the ownership stakes of foreigners, insiders, and restituents. While the findings for foreigners and insiders can be attributed to their superior ability to identify more profitable firms, we interpret the findings on restituents as evidence of the beneficial effect of blockholdings. On the other hand, we find that the ownership of the fund with the largest stake is not significantly related with share value, suggesting that the value of external blocks depends on the identity of the owner. However, when the fund is also the largest blockholder in the firm, it has an adverse effect on share value. The negative effect of the dominant block owned by a fund is mitigated, however, when a bank sponsors the fund. Although funds are legally separated from their sponsoring institutions, bank-sponsored funds may nevertheless have inherited a better access to the innards of these firms, and may be in a better position to monitor them.

JEL Classification: G31, G32, P31

Suggested Citation

Makhija, Anil K. and Spiro, Michael H., Ownership Structure as a Determinant of Firm Value: Evidence from Newly Privatized Czech Firms. Available at SSRN: https://ssrn.com/abstract=237792

Anil K. Makhija (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-1899 (Phone)

Michael H. Spiro

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States

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