Determinants of Ultimate Control of Large Firms in Transition Countries: Empirical Evidence

We identify the ultimate ownership structures of the 20 largest firms in 12 transition countries in 1996, and the subsequent patterns of ownership change over 1996–2008. Of the state-controlled companies in 1996 more than half are still in state hands in 2008. Better quality of governmental institutions, larger external but not domestic government debt, smaller company size, and higher company profitability increase the likelihood of privatization as well as the likelihood that the company ends up ultimately in foreign hands. We document that, after 20 years, control structure and institutional quality convergence on the West is still largely incomplete.