Choice of Ownership Structure and Firm Performance: Evidence from Estonia

Type of Work

Article

Date

3-2005

Journal Title

Post-Communist Economies

Journal ISSN

1463-1377

Journal Volume

17

Journal Issue

1

First Page

83

Last Page

107

DOI

10.1080/14631370500052779

Abstract

This article uses panel data for a representative sample of Estonian enterprises to analyse diverse issues related to the determinants of ownership structures and ownership changes after privatisation. A key focus is to determine whether ownership changes are related to economic efficiency. While employee-owned firms are found to be much more prone than other firms to switch ownership categories, often "employee-owned" firms remain "insider-owned" as ownership passes from current employees to managers and former employees. Logit analysis of the determinants of ownership structures and ownership changes provides mixed support for several hypotheses. As predicted: (i) wealth and resource constraints play a crucial role in the determination of ownership, with foreigners buying firms with the highest equity levels and insiders buying firms with the lowest equity valuations; (ii) risk aversion explains subsequent ownership changes, especially away from employee ownership; (iii) allocation of ownership depends on the pre-privatisation origin and location of the firm, and these factors also influence subsequent ownership changes. Our findings provide mixed support for the hypothesis that ownership changes are related to economic efficiency.

Notes

JEL Classification: G32, L25, P31

Hamilton Areas of Study

Economics

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