The Effects of Privatization and Corporate Governance of SOEs in Transition Economy: The Case of Kazakhstan

We focus on the relationship between corporate governance and corporate performance by initial public offerings (IPOs) of Kazakhstan state-owned enterprises (SOEs) in the transition economies of Central Asia. We argue that privatization (i.e., IPO) has different effects depending on the types of owners to whom it gives control in corporate governance. We investigated the long-run stock performance of Kazakhstan companies listed on the London Stock Exchange (LSE) and the Kazakhstan Stock Exchange (KASE) in order to determine whether the IPOs of SOEs are underperforming or overperforming in the long term and the determinants of their performance. The data contain 536 observations of a listed non-financial company, including board size, whether the directors are independent, CEO/chair duality, institution ownership, government shareholding, and managerial ownership. The results show that return on equity (ROE) is significantly affected by the ownership structure (institutional ownership and managerial ownership) of Kazakhstani firms listed on the LSE. Metal and mining and oil and gas industries show the strong relationship buy and hold return (BHR) and market return, firm size, ROE and initial return on long-term performance.

WORKING PAPER NO: 1127