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Voucher privatization programmes have been criticized for
distributing ownership so widely that effective control over management
becomes impossible: individual shareholders have insufficient incentives
to monitor management on their own and excessive incentives to free-ride
on other shareholders' monitoring efforts. In Discussion Paper No. 1215,
Research Fellow Sweder van Wijnbergen and Anton Marcincin
assess this criticism based on the experience of the Czech Republic's
voucher privatization programme implemented in 1993. In their analysis,
the authors use a feature unique to the Czech and Slovak auction
procedure: information about the presence of a dominant investor was
typically already available at the time of the last round. The authors use data from these auctions and early stock market quotations to assess whether concentrated ownership led to higher share prices, and to investigate whether this was due to dominant investors' inside information or to the anticipation of better corporate governance in their presence. The results show that this presence in earlier rounds tended to boost share prices: the larger the Investment Privatization Fund (IPF) contribution, the higher the price. The same exercise using later data on share prices from the stock market rather than from the auction rounds produces broadly the same results, with some interesting modifications: the positive impact of a large presence of the IPF disappeared in the stock market regressions. But the presence of a dominant foreign investor or of a dominant IPF still boosted share valuation. Voucher Privatization, Corporate Control and the Cost of Capital: An Analysis of the Czech Privatization Programme Sweder van Wijnbergen and Anton Marcincin Discussion Paper No. 1215, September 1995 (FE) |