Ownership Change, Institutional Development and Performance

This paper conducts a cross-country empirical study of institutions and agency conflicts around ownership reforms and their implications for changes in performance and efficiency. We examine two main questions. First, we examine the privatization sample and evaluate property rights and institutional quality effects on performance and efficiency. We find that property rights and contracting rights protections contribute to stronger post-privatization performance. Second, we ask whether sectors undergoing changes from state to private ownership exhibit better or worse performance than sectors remaining public. We find an insignificant effect of privatization in ordinary least squares estimates and a negative short-term effect after correcting for endogeneity of privatization decisions that disappears in the long run, consistent with recently privatized enterprises facing short-run costs of restructuring and the challenges of mitigating agency and expropriation concerns