Ownership Structure, Corporate Governance and Enterprise Performance

The paper examines empirically the effect of ownership structure on corporate governance and performance of privatized enterprises in transition. The data are taken from a survey conducted in 2001 on 202 medium-sized and large firms in Ukraine for the period 1998 - 2000. The ownership structure is measured by the percentage of shares held by each type of owner (state, managers, worker, Ukrainian concentrated outsiders, foreign concentrated owners, stake-holding shareholders), performance is measured by sales per employee. Regression analysis is used to test the hypothesis that concentrated outside ownership influences performance positively and to detect non-linear effects of ownership variables on performance. In contrast with important previous studies on enterprise restructuring in Ukraine (e. g., Estrin and Rosevier, European Economic Rev. 43, 1999) we find significant ownership effects on performance. Insider ownership (being a special case of stakeholding ownership) is found to have a significantly non-linear effect on performance - positive within a lower range, but negative from a threshold close to majority ownership onwards. Ukrainian outside owners in general do not have a significant effect on performance, stakeholding ownership by customers, however, affect sales prices and performance negatively. The most robust results are obtained for the effects of concentrated foreign ownership, both for levels of the respective variables in each year and for changes from on year to the other. The impact of foreign ownership on performance is significantly non-linear: Its effect is positive only up to a level that falls short of majority ownership. We conclude that this non-linearity is due to an institutional environment still adverse to foreign direct investment