Chapter

Privatization and Corporate Governance

Simon Johnson and Andrei Shleifer

in Governance, Regulation, and Privatization in the Asia-Pacific Region

Published by University of Chicago Press

Published in print March 2004 | ISBN: 9780226386799
Published online February 2013 | e-ISBN: 9780226386966 | DOI: http://dx.doi.org/10.7208/chicago/9780226386966.003.0002
Privatization and Corporate Governance

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This chapter discusses the corporate governance of privatized firms. Ronald Coase (1960) explained the conditions under which individuals and private firms should be able to make contracts as they please. As long as the enforcement costs of these contracts are nil, individuals do not need statutory law or can find ways to contract around the law. Coasian arguments have had great influence on discussions about corporate finance, and the chapter focuses on this literature. A great deal of research suggests that privatization can be helpful for economic development. But the effectiveness of privatization is greater when corporate governance works well. It is argued that effective laws are an important requirement for corporate governance. Without enforceable investor protection, privatization is less likely to succeed. Two commentaries are also included at the end of the chapter.

Keywords: privatized firms; corporate governance; laws; investor protection; corporate finance

Chapter.  9284 words.  Illustrated.

Subjects: Business and Management

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