Essays on Firm Ownership, Performance and Value.

Abstract

This dissertation studies the relationship between firm ownership and firm performance as measured by firm productivity and profitability. Given the vast dispersion in owner and firm characteristics, changes in ownership have the potential to translate into differences in firm performance. Chapter 2 focuses on differences in performance between foreign-owned and domestic-owned enterprises. It uses firm-level micro data from India to study the direct impact of foreign ownership on firm productivity. There appears to be no significant difference in the performance of foreign-acquired versus non-acquired firms over the short run, but there is evidence of a productivity improvement for foreign-acquired firms over a longer time horizon. Conversely, foreign divestitures do not lead to significant differences in performance between foreign-divested firms and firms that remain foreign-owned. Exploiting a unique longitudinal dataset of Chinese enterprises, Chapter 3 studies the importance of degrees of foreign ownership by examining the implications of full versus partial foreign ownership. Using a difference-in-differences matching estimator and three alternative measures of profitability, firm performance is found to neither improve nor deteriorate after foreign buyouts. Chapter 4 presents a model explaining how governments decide the order in which to privatize state owned enterprises. The model gives the clear testable prediction that firms which would experience the greatest improvement in profit levels after privatization should be privatized first. The validity of the theoretical result is tested on a firm level panel data set constructed from Bulgarian Privatization Agency documents. The empirical estimation confirms that firms with larger gaps between their average after privatization profits and before privatization profits are privatized sooner.