Post-Privatization Ownership Structure and Productivity in Russian Industrial Enterprises
SITE Working Paper No. 127
Posted: 27 Apr 1998
Date Written: March 1998
Abstract
This paper investigates the impact of ownership structure on the productivity performance of Russian industrial enterprises. The analysis compares the effects of several types of new private owners--insiders (managers and other employees) and outsiders (individual and institutional investors)--with continued ownership by the state, and it takes into account possible selection effects in the privatization process that may bias the observed ownership-performance relationship. Drawing upon a large survey of enterprises in July 1994, the paper provides OLS regression estimates that controlling for other factors show a positive impact of private share ownership, relative to state, on labor productivity, with most of this result due to the positive effects of insider, especially managerial ownership; among outsiders, only individual share ownership has a positive and statistically significant impact. But some of these OLS results appear to be artifacts of simultaneity bias in the process determining ownership: IV estimates show a positive impact of outside ownership but the estimated effects of both types of inside ownership are insignificant. Among different types of outside owners, the estimated impact of concentrated institutional investors is strengthened in the IV compared to the OLS estimates, becoming larger in magnitude and statistically significant, while that of dispersed individuals is weakened. Overall, the results provide some evidence that ownership change in Russia was already having some positive effects, shortly after the conclusion of the voucher privatization process, but that those effects were strongest in companies with concentrated outside owners. Because the design of the Russian privatization program appears to have been biased against such institutional investors, the latter finding only emerges after a careful analysis of the simultaneous determination of ownership and performance through the privatization process.
JEL Classification: C30, G32, L10, L33, P20, P31
Suggested Citation: Suggested Citation