Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political Interference in Water Prices

Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political... As an alternative to privatization, corporatization implies shifting control rights from politicians to managers—through the creation of a separate legal entity—while ownership remains with the government. Even though corporatized firms are fairly common, little empirical work has tried to quantify the effects of corporatizations. This paper tries to fill this gap by analyzing the effect of corporatization on the price-setting behavior of public firms. The theoretical prediction that corporatization decreases political interference in price setting is tested using a dataset of Austrian water providers. The empirical evidence largely corroborates this hypothesis. Specifically, the results show that the impact of electoral cycles and intense political competition on price setting is significantly restrained in corporatized firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political Interference in Water Prices

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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-013-9401-0
Publisher site
See Article on Publisher Site

Abstract

As an alternative to privatization, corporatization implies shifting control rights from politicians to managers—through the creation of a separate legal entity—while ownership remains with the government. Even though corporatized firms are fairly common, little empirical work has tried to quantify the effects of corporatizations. This paper tries to fill this gap by analyzing the effect of corporatization on the price-setting behavior of public firms. The theoretical prediction that corporatization decreases political interference in price setting is tested using a dataset of Austrian water providers. The empirical evidence largely corroborates this hypothesis. Specifically, the results show that the impact of electoral cycles and intense political competition on price setting is significantly restrained in corporatized firms.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Aug 8, 2013

References

  • Government outsourcing: Public contracting with private monopoly
    Auriol, E; Picard, PM
  • Does privatization of solid waste and water services reduce costs? A review of empirical studies
    Bel, G; Warner, M
  • Is private production of public services cheaper than public production? A meta-regression analysis of solid waste and water services
    Bel, G; Fageda, X; Warner, M
  • The impact of the corporatization process on the financial performance of Canadian state-owned enterprises
    Bozec, R; Breton, G
  • Public-private partnerships and prices: Evidence from water distribution in France
    Chong, E; Huet, F; Saussier, S; Steiner, F

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