Equality, Participation, Transition: Essays in Honour of Branko Horvat

Furthermore, there are interesting patterns concerning minority
ownership. Thus in 1995, foreigners were very rarely the largest minority
group in firms owned by insiders. Similarly, insiders (and especially
employees) were unlikely to be the largest minority in firms in which
foreigners had majority ownership. From the perspective of minority
ownership, there are strong indications that ownership structures are
often inert. Thus in 1997 (as in 1995), large degrees of minority ownership
by employees continued to be a relatively infrequent occurrence
in firms in which most ownership lies overseas. At the same time, several
changes were apparent between 1995 and 1997 in the relationship
between majority owner and key minority owners. Most interestingly,
perhaps, is the observed tendency for all minority groups to become
more important in firms in which managers have the majority share.
10.5 Economic effects of privatization
Derek C. Jones and Niels Mygind 169
To analyze relationships between structures of and changes in ownership
and enterprise performance, we draw on an approach developed
by Frydman et al. (1997) and also used and extended for the case of
Russia (Jones, 1998). While the method of Frydman et al. (1997) is
broadly comparable to approaches used in other studies (for example,
Earle and Estrin, 1996), this particular empirical strategy has some
novel attractions. Potentially most important, since the year of privatization
varies across firms, an attempt is made to measure all key variables
in privatization (rather than in calendar) time. Moreover, to deal
with noisy data, performance is usually measured as an average (a
growth rate) over a period of time (rather than for a single year). In
addition, in an attempt to focus on the post-privatization performance
of firms, a control for inherited pre-privatization differences in performance
is included (namely, a measure of performance during the initial
year of privatization). Then, the transition or marketization effect
(which is common to all firms) is defined as the sum of the constant
term plus the coefficient on the initial performance variable multiplied
by average initial performance. 11 In some regressions, the coefficient
on a privatization dummy measures the incremental performance
effect specific to privatized firms, 12 whereas in other specifications a set
of dummies for the largest owner (different forms of privatization) are
included instead of the privatization dummy variable.
While the empirical strategies of Frydman et al. used in this approach
are useful and innovative, as our earlier review indicated, other theoretical
and empirical evidence suggests that when examining the