Banks and the Privatization of Enterprises in Poland

The privatization of the industrial sector is one of the major tasks governments in transitional economies are confronted with, but only a minority of countries have managed to pursue it successfully. There are many reasons that explain this sluggishness, with various political constraints standing at the top of the list, but the lack of large institutional investors is commonly mentioned next. This is why some experts point to banks as appropriate candidates to take an active stance in the privatization process (van Wijnbergen, 1994). In this chapter we address this issue with reference to the Polish experience. The first section discusses whether the banks as large equity holders are able to contribute to the process of restructuring enterprises. It takes a closer look at the problem of whether banks which hold both debt and equity can contribute to efficient corporate governance. In the present author’s view the arguments presented in the literature raise serious doubts.