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Enterprise Breakups And Performance During The Transition From Plan To Market

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Author Info
Lubomir Lizal
Miroslav Singer
Jan Svejnar

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Abstract

Using firm-level data, we estimate the effects of the major wave of 1991 breakups of Czechoslovak state-owned enterprises on the subsequent performance of the "master enterprises" and spun-off divisions. We estimate the performance effects of spinoffs by comparing the performance of enterprises that remained intact throughout the 1990-1992 period to the performance of the master enterprises that experienced spinoffs and the newly spun-off subsidiaries. Our estimates suggest that the breakups had a significant immediate effect on the productive efficiency and on the profitability of industrial firms in 1991, and that the effect became much less significant in 1992. The effect is a negative function of the size of the spinoff, being positive for small to slightly above average-sized spinoffs and negative for very large ones. We cannot reject the hypothesis that the estimated effect was identical for the spun-off subsidiaries and the master enterprises that experienced the spinoffs. Our 1991 estimates suggest that the large firms created under the centrally planned system suffered from inefficiencies that were alleviated by the breakups. The 1992 estimates are consistent with increased competition and the appropriation of profits by managers. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 83 (2001)
Issue (Month): 1 (February)
Pages: 92-99
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Handle: RePEc:tpr:restat:v:83:y:2001:i:1:p:92-99

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  1. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2004. "Spinoffs, Privatization and Corporate Performance in Emerging Markets," William Davidson Institute Working Papers Series 2004-685, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  2. Polona Domadenik & Janez Prašnikar & Jan Svejnar, 2003. "Defensive and Strategic Restructuring of Firms during the Transition to a Market Economy," William Davidson Institute Working Papers Series 541, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  3. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2002. "The Effects of Privatization and Competitive Pressure on Firms’ Price-cost Margins: Micro Evidence from Emerging Economies," LICOS Discussion Papers 12502, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
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  4. Polona Domadenik & Lubomir Lizal & Marko Pahor, 2003. "Effect of Enterpise Break-Ups on Performance: Case of Former Yugoslav Republic of Macedonia," CERGE-EI Working Papers wp216, The Center for Economic Research and Graduate Education - Economic Institute, Prague. [Downloadable!]
  5. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2003. "The Effects Of Privatization And International Competitive Pressure On Firms’ Price-Cost Margins: Micro Evidence From Emerging Economies1," William Davidson Institute Working Papers Series 2003-603, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  6. Barbara M. Roberts & Steve Thompson, 2005. "Firm Turnover, Restructuring and Labour Productivity in Transition: The Case of Poland," Discussion Papers in Economics 05/27, Department of Economics, University of Leicester. [Downloadable!]
  7. Jan Svejnar, 2001. "Transition Economies: Performances and Challenges," William Davidson Institute Working Papers Series 415, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  8. Basu, Swati & Estrin, Saul & Svejnar, Jan, 2004. "Employment Determination in Enterprises under Communism and in Transition: Evidence from Central Europe," IZA Discussion Papers 1370, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Lubomir Lizal & Jan Svejnar, 2001. "Investment, Credit Rationing and the Soft Budget Constraint: Evidence from Czech Panel Data," William Davidson Institute Working Papers Series 363, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  10. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter. [Downloadable!] (restricted)
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