In the previous chapters we have provided stylized facts about privatization processes, trying to understand why the extent of divestiture varies so greatly across countries. Then we have set forth the main trade-offs that privatization involves, and explained how governments solve these trade-offs through the choice of the privatization method.
This positive analysis has certainly been important and has allowed us to draw a comprehensive picture of the phenomenon at stake. However, a fundamental question remains unexplained: did governments really transfer the ownership and control of SOEs to the private sector? Was privatization aimed at improving incentives in SOEs or simply driven by budgetary motives?
There is a lingering belief that, hidden behind significant results in terms of revenue, either partial sales or majority stakes (sold in combination with legislative and statutory restrictions designed to keep control in the hands of the state) could be found.
This chapter presents updated empirical evidence on the transfer of ownership and control in privatized companies. The transfer of ownership is measured by the stakes sold in the various operations in different countries. The transfer of control, instead, is analysed through the government's residual stake in privatized companies, and by the temporary or permanent restrictions to the control rights of the private investors such as 'golden shares'.
Our analysis allows us to conclude that the large-scale privatization cycle of the 1990s has been important, but incomplete. The process has been largely conducted through partial sales, which have certainly been useful for introducing a monitoring component in the management and for spurring economic performance. However, the state is still an influential blockholder in several privatized firms. Particularly, the state—despite privatization—still controls, by direct and indirect means, large chunks of national strategic sectors, where the larger and most valuable corporations operate.
Several possible factors could explain this reluctance to sell. From the political point of view, governments may want to keep privatized companies under control as it allows them to cater for specific interest groups (Boycko, Shleifer, and Vishny 1994). However, economic and institutional constraints may also hinder the roll-back of the state from economic activity. Indeed, the benefits of