Privatization, Ownership Structure, and Firm Performance: New Evidence from the Romanian Experiment

We construct and analyze 1992-2001 panel data to study the effects of alternative postprivatization ownership structures on firm performance and the time profile of firm performance before and after privatization for the surviving population of initially stateowned enterprises in Romania. Applying OLS and fixed-effects methods to a variety of specifications, we find consistently positive, highly significant effects of private ownership on labor productivity growth, the point estimates implying an additional 1.5 to 1.9 percentage growth for an increase of 10 percent in the private shareholding. The strongest estimated impacts arise from sales to outside foreign and domestic blockholders, but insider transfers and voucher privatization are also estimated to have positive, although much smaller, effects on firm performance. Besides the immediate effect, privatization has an impact on firm performance over several years. We also find that the pre-privatization effect is positive.