Privatisation in Developing Countries: Performance and Ownership Effects

Over the last twenty years, privatisation, defined as the transfer of public assets (firms) from the government to private investors, has been on the reform agenda of more than 120 developing countries. The switch of ownership induces major changes in the corporate governance of firms, and in their incentives to restructure and improve efficiency and performance. This article evaluates this experience, focusing on its impact on corporate performance and governance, identifying several issues yet to be resolved.     

The governance role of multiple large shareholders: evidence from the valuation of cash holdings

This paper investigates the governance role of multiple large shareholders (MLS, henceforth), as evidenced by their impact on the valuation of cash holdings. For a sample of 2,723 firms from 22 countries, we find that the presence of MLS enhances the valuation of firms’ cash holdings. In particular, we show that the valuation of cash is positively associated with an even distribution of blockholders’ voting rights and with higher contestability of the largest shareholder’s control. We also show that the impact of MLS on the valuation of cash holdings is more pronounced for family-controlled firms, consistent with investors perceiving family owners as associated with greater expropriation risk. Overall, our results contribute to the literature on corporate governance by showing that MLS improve internal monitoring and moderate the agency costs of firms’ cash holdings.