The Impact of Ownership and Structural Reforms on Productivity

Company productivity is expected to be affected by trade liberalisation.

Faced with higher competition, companies are under heavy pressure to increase their productivity and to insure their survival by cutting down the managerial slack and by investing in innovation. The positive effect that increased competition exerts on company efficiency is likely to be weaker in companies, where managers are not effectively monitored and are free to pursue own short term goals. The extent, to which managers are monitored by owners, depends on the level of ownership concentration: in companies with dispersed ownership, rewards from costly and effort demanding monitoring activity are small. Consequently, we expect that the impact that increased openness has on company productivity depends on ownership structure. So far this fact has not been investigated in the literature. The current project will empirically address this issue by using financial and ownership data on Czech companies. The Czech transition process is a unique natural experiment, where increased openness has been accompanied by firm privatisation. Our results should have direct policy implications. We should be able to identify the conditions, under which increased openness brings high benefits. The expected results are highly relevant in the view of further EU enlargement to countries that are still in the early stages of their transition process. This study is likely to be the first one in a row of theoretical and empirical studies that address this issue.

This research project is financed by the Danish Social Sciences Research Council with a grant of DKK 1.1 million (approximately EUR 150.000) and by Copenhagen Business School.

The research team consists of Associate Professor Lisbeth la Cour and post doc Delia Ionascu.