Spinoffs, Privatization and Corporate Performance in Emerging Markets

Jan Hanousek, Evžen Kočenda and Jan Svejnar

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We use new firm-level data to examine the effects of spinoffs and privatization on corporate performance in a rapidly emerging market economy. Unlike the existing literature, which analyzes spinoffs almost exclusively in advanced economies, we control for accompanying ownership changes and the fact that spinoffs and ownership are endogenous variables. We find that spinoffs increase the firm’s profitability but do not alter its scale of operations, while the effect of privatization depends on the resulting ownership structure – sometime improving performance and sometime bringing about decline that is consistent with tunneling (looting) by managers or (partial) owners. The effects of privatization are hence much less clear-cut than suggested in earlier studies. Methodologically, our study provides evidence that it is important to control for changes in ownership when analyzing spinoffs and generally to control for endogeneity, selection and data attrition when analyzing the effects of spinoffs and privatization.

Keywords: Spinoffs; breakups; privatization; corporate performance; endogeneity. (search for similar items in EconPapers)
JEL-codes: D23 G32 G34 L20 M21 P47 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-05-01
New Economics Papers: this item is included in nep-cfn and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Spinoffs, Privatization and Corporate Performance in Emerging Markets (2004)
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