Is the company performance endogenous in the ownership concentration? Evidence from the Romanian Mass Privatization

This study addresses one of the most controversial questions in corporate finance, namely the causal effect between the company performance and private ownership. We use the information about the original design of the mass privatization in Romania in order to test whether the subscription decision of small, private, non-pivotal, financially unconstrained and uncoordinated shareholders is performance-related. We propose three different metrics for the size of private ownership depending on the treatment applied to the degree of subscription of the privatization offer. Our results support the idea that individuals behave in conformity with the percepts of the market theory and call attention on the importance of the high quality disclosure enabling the market participants to make their own assessment