Ownership Changes and Investment in Transition Countries

38 Pages Posted: 8 Feb 2007

See all articles by Klaus Peter Gugler

Klaus Peter Gugler

Vienna University of Economics and Business; European Corporate Governance Institute (ECGI)

Evgeni Peev

University of Vienna - Department of Economics

Date Written: May 2007

Abstract

We estimate accelerator-cash flow models for 25,000 firms in 15 transition economies over the period 1993-2003, and find that (1) investment-cash flow sensitivities decline over transition years, which we attribute to a decreasing of asymmetric information and managerial discretion as capital markets and corporate governance standards develop. (2) After an ownership change, the investment-cash flow sensitivity declines, indicating that new owners reduce either cash constraints or managerial discretion or both. (3) For state owned firms, in early transition the investment-cash-flow sensitivity is negative, but in late transition the coefficient becomes positive. We interpret the first fact as being consistent with soft budget constraints, and the second with managerial discretion. (4) Privatised firms invest efficiently in the long run. (5) Foreign- and financially-controlled firms are less financially constrained than other firms.

Keywords: Investment, cash flow, ownership change, corporate governance, transition

JEL Classification: G3, O16, P3

Suggested Citation

Gugler, Klaus Peter and Peev, Evgeni, Ownership Changes and Investment in Transition Countries (May 2007). ECGI - Finance Working Paper No. 169/2007, Available at SSRN: https://ssrn.com/abstract=961782 or http://dx.doi.org/10.2139/ssrn.961782

Klaus Peter Gugler (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

HOME PAGE: http://www.wu.ac.at/iqv/mitarbeiter/gugler

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Evgeni Peev

University of Vienna - Department of Economics ( email )

Bruennerstrasse 72
Vienna, A-1210
Austria

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