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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

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 Technology

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Bibliographic Info

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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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Amess, Kevin & Roberts, Barbara M., 2007. "The productivity effects of privatization: The case of Polish cooperatives," International Review of Financial Analysis, Elsevier, vol. 16(4), pages 354-366.
  2. Lubomír Lízal & Jan Svejnar, 2002. "Investment, Credit Rationing, And The Soft Budget Constraint: Evidence From Czech Panel Data," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 353-370, May.
  3. Evzen Kocenda & Jan Hanousek, 2012. "Firm break-up and performance," Economics of Governance, Springer, vol. 13(2), pages 121-143, June.
  4. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2004. "Spinoffs, Privatization and Corporate Performance in Emerging Markets," Microeconomics 0406003, EconWPA.
  5. 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.
  6. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frédéric, 2003. "The Effects of Privatization and Competitive Pressure on Firms’ Price-Cost Margins: Micro Evidence from Emerging Economies," Working Papers 03-17, University of Aarhus, Aarhus School of Business, Department of Economics.
  7. Randall K. Filer & Jan Hanousek, 2001. "Data Watch: Research Data from Transition Economies," William Davidson Institute Working Papers Series 416, William Davidson Institute at the University of Michigan.
  8. Hovey, Martin & Naughton, Tony, 2007. "A survey of enterprise reforms in China: The way forward," Economic Systems, Elsevier, vol. 31(2), pages 138-156, June.
  9. Liu Wang & William Judge, 2012. "Managerial ownership and the role of privatization in transition economies: The case of China," Asia Pacific Journal of Management, Springer, vol. 29(2), pages 479-498, June.
  10. Swati Basu & Saul Estrin & Jan Svejnar, 2005. "Employment determination in enterprises under communism and in transition: Evidence from Central Europe," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 353-369, April.
  11. Bennett, John & Maw, James, 2003. "Privatization, partial state ownership, and competition," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 58-74, March.
  12. Jan Svejnar, 2001. "Transition Economies: Performances and Challenges," William Davidson Institute Working Papers Series 415, William Davidson Institute at the University of Michigan.
  13. 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.
  14. Jana P. Fidrmuc, 2006. "Channels of Restructuring in Privatized Czech Companies," Working Papers wpn06-18, Warwick Business School, Finance Group.
  15. Jurajda, Stepán & Terrell, Katherine, 2008. "Job Reallocation in Two Cases of Massive Adjustment in Eastern Europe," World Development, Elsevier, vol. 36(11), pages 2144-2169, November.
  16. 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.

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