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Endogenous ownership structure: factors affecting the post-privatisation equity in largest Hungarian firms

Bishop, K.; Filatotchev, I.; Mickiewicz, T.; (2002) Endogenous ownership structure: factors affecting the post-privatisation equity in largest Hungarian firms. (Economics Working Papers 5). Centre for the Study of Economic and Social Change in Europe, SSEES, UCL: London, UK. Green open access

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Abstract

Using a data set for 162 largest Hungarian firms during the period of 1994-1999 this paper explores the determinants of equity shares held by foreign investors and by Hungarian institutional investors.. We find evidence of a post-privatisation evolution towards more homogeneus equity structures, where dominant categories of owners aim at achieving controlling stakes. Here, the foreign investors and Hungarian institutional investors play the major role. In addition, focusing on firm level characteristics we find that the exporting firms attract foreign owners, who acquire controlling equity stakes. Similarly, the firm size measurements are positively associated with the presence of foreign investors. However, they negatively associated with 100% foreign ownership, since the marginal costs of acquiring additional equity are growing with the size of the assets. We interpret the results in light of the existing theory. In particular, following Demsetz and Lehn (1985) and Demsetz and Villalonga (2001) we argue that equity should not be treated as an exogenous variable. As for specific determinants of equity levels, we focus on informational asymmetries and (unobserved) ownership specific characteristics of foreign investors and Hungarian investors.

Type: Working / discussion paper
Title: Endogenous ownership structure: factors affecting the post-privatisation equity in largest Hungarian firms
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.ssees.ucl.ac.uk/wp5sum.htm
Language: English
Additional information: This research forms a part of the ACE-Phare Project P-981048-R on ‘Corporate Governance, Relational Investors, Strategic Restructuring and Performance in Hungary and Poland’. The authors are grateful to the European Commission for its support. In addition, we wish to thank Zoltan Adam, Slavo Radosevic, Adam Torok and Peter Vince for providing useful comments. Please see http://discovery.ucl.ac.uk/17644 for a version published in Acta Oeconomica
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/17576
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