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Yes / We empirically investigate the impact of different ownership groups on companies’ investment in Ukraine with a novel dynamic investment model where investment is based on present and historical levels of profitability (market-to-book value of equity) and lagged investment. Groups include state, insider, non-domestic, financial and financial and industrial group (FIG) ownership. Contrary to the literature, we find that the past level of profitability significantly affects investment; the presence of and increases in state ownership have a negative impact on firms’ investment, as is the case for non-domestic and financial companies’ ownership. Insider and FIG ownership have no impact on investment. We explain the results by the extent of liquidity concerns (hard and soft budget constraints) and the extent of asset stripping for the corresponding ownership group and relate them to over- and underinvestment, and to the free cash flow or cash constraint hypothesis.

Using a unique dataset comprising information for (up to) 153 firms in the machine building sector in Belarus, we investigate the determinants of firm growth for an economy where state ownership of enterprises is widespread. We use panel data models based on generalizations of Gibrat's law, total factor productivity estimates and matching methods to assess the differences in firm growth between private and state-contolled firms. Our results indicate that labor hoarding and soft budget constraints play a particularly important role in explaining differences in performance between these two groups of firms.

<p>"Taxation, Career Concerns and CEO Pay". This paper proposes a simple dynamic model of equilibrium CEO compensation. Motivated by the strengthened career incentives stemming from the fall in the top income tax rates over the past decades, I study the implications of a model where the quality of talent identification depends on how hard individuals work in order to be among the winners in the contest for managerial positions. It is shown how the compensation of CEOs can be interpreted in this light, across time, across industries, and across countries, and I provide some evidence showing that the predictions of the model are in line with several empirical developments over the past decades.</p><p>"Incentives under Communism: The Value of Low-Quality Goods". In this paper, I study how efficiently centrally planned regimes can provide incentives across different stages of economic development. In particular, I study the attractiveness of an incentive system based on exclusive provision of high-quality goods to high-ranked members of society. At low levels of economic development, a self-interested regime can exploit such an incentive system to reduce the cost of providing incentives. However, such an incentive system generally loses its attractiveness as the economy grows. The economic performance of the centrally planned economies is then analyzed in light of this result.</p><p>"The Business of Troubled Autocrats". Many autocrats control resource rents. Typically, they rely on these rents in order to buy political support. In this paper, I study how such autocrats behave in product and capital markets, in particular at times of financial distress. The main questions are: How does the asset position of an autocrat affect his behavior as a producer in a market with rents? From whom does the autocrat obtain financing in order to get out of difficulties? I show that when the asset position of the autocrat drops below a certain threshold, output drops below the level of a standard monopolist. Further, the autocrat can obtain less expensive financing domestically by exploiting the presence of vested interests, implying that there is zero foreign debt in equilibrium.</p>

"Taxation, Career Concerns and CEO Pay". This paper proposes a simple dynamic model of equilibrium CEO compensation. Motivated by the strengthened career incentives stemming from the fall in the top income tax rates over the past decades, I study the implications of a model where the quality of talent identification depends on how hard individuals work in order to be among the winners in the contest for managerial positions. It is shown how the compensation of CEOs can be interpreted in this light, across time, across industries, and across countries, and I provide some evidence showing that the predictions of the model are in line with several empirical developments over the past decades. "Incentives under Communism: The Value of Low-Quality Goods". In this paper, I study how efficiently centrally planned regimes can provide incentives across different stages of economic development. In particular, I study the attractiveness of an incentive system based on exclusive provision of high-quality goods to high-ranked members of society. At low levels of economic development, a self-interested regime can exploit such an incentive system to reduce the cost of providing incentives. However, such an incentive system generally loses its attractiveness as the economy grows. The economic performance of the centrally planned economies is then analyzed in light of this result. "The Business of Troubled Autocrats". Many autocrats control resource rents. Typically, they rely on these rents in order to buy political support. In this paper, I study how such autocrats behave in product and capital markets, in particular at times of financial distress. The main questions are: How does the asset position of an autocrat affect his behavior as a producer in a market with rents? From whom does the autocrat obtain financing in order to get out of difficulties? I show that when the asset position of the autocrat drops below a certain threshold, output drops below the level of a standard monopolist. Further, the autocrat can obtain less expensive financing domestically by exploiting the presence of vested interests, implying that there is zero foreign debt in equilibrium.

No / We analyse the impact of ownership and corporate control on firms’ investment using the 2001survey of Yacoub et al. on Ukrainian firms. The model explains investment by output, financial and soft budget constraints, and corporate control (and ownership) categories potentially enjoying private benefits of control. We find that the corporate control model fits better than the ownership model,a negative relationship between state and employee control and firms’ investment, and evidence forthe presence of soft budget constraints. A negative relationship between firms’ investment and the relative size of non-monetary transactions strengthens the conclusion of private benefits of control impacting investment.

Yes / In this paper, we extend Tobin’s Q model under financial frictions (Hennesy, Levy, and Whited, Journal of Financial Economics (2007)), using a discrete-time version of their model, to include private benefits of control of managers and other stakeholders and soft budget constraints in the form of money injections into the firm. Managers are not viewed to maximise shareholder value, but to maximise the value of their shareholding plus their private benefits of control. Private benefits of control introduce elements of asset stripping into the model. We characterize the optimal investment policy, analyse comparative statics and discuss applications to firms in transitional economies.

Yes / In this paper, we empirically analyze the impact of ownership groups on companies’ investment rates in Ukraine using a new dynamic Tobin’s Q model allowing investment rates to depend on present and lagged Q. We find that the presence of a majority in and increases in state, non-domestic and financial companies’ ownership has a significantly negative impact on investment rates. State and insider ownership are associated with soft budget constraints whereas non-domestic, financial companies’ and financial and industrial groups’ ownership with hard budget constraints. The dynamic model shows persistence in the market-to-book value of equity, the proxy for Q.

Yes / We empirically analyze the impact of different ownership groups on companies’ investment rates in Ukraine allowing investment rates to depend on present and past market-to-book values of equity. We relate the impact to the presence of soft and hard budget constraints, to the free cash flow and the cash constraint hypothesis and discuss over- and under-investment. Several robustness checks, in particular, the potential endogeneity of ownership variables are considered.

Chinese rural enterprises (REs) have continued to grow rapidly since the end of the 1970s, and today these enterprises account for half of China’s industrial output, up from nine per cent in 1978. As a market-oriented nonstate sector, the development of the REs has significantly contributed to both China’s impressive post-reform economic growth and its transition away from a centrally planned economy. This thesis focuses on examining the following important, yet poorly understood, issues of the development of Chinese REs: patterns of local government investment decision-making and impact of local government on the capital structure of the REs through its capital investment and its influence on the REs’ access to bank loans and on the extent to which outstanding payments of taxes and other dues to government serve as an informal credit in the total capital of REs. the phenomenon of soft budget constraints in the RE sector; how it is affected by local government ownership of REs, and what the major sources of budget softness are among local government investment, bank loans, informal credits such as inter-firm arrears, and payment of taxes. the nature and characteristics of transaction costs facing REs and how economic and institutional factors such as the level of economic development, degree of marketisation, the role of local government as well as informal institutions may have affected these costs. The empirical studies of this thesis are based on a set of detailed data from a survey of 630 REs which was undertaken in Sichuan and Zhejiang provinces in 1990. The results of these studies show that in many respects of their operation, REs – especially those owned by local governments – tend to follow rules of neither a planned nor a market system, but those of somewhat in between. / Diss. Stockholm : Handelshögsk.