We present evidence of major adjustment efforts in the State sector in Poland well before privatization. Extensive survey evidence is used both to establish this point and to find an answer to the question why managers instigated such reforms in spite of the absence of an effective ownership structure. We find both the government and, importantly, commercial banks, exercised strong governance: the government through its refusal to give open-ended subsidies and a tax-based wage policy, the effectiveness of which we establish using econometric techniques; and the banks through their discretion in allocating new funds. We also show that banks started to discipline their borrowers only after strong governance reforms for the banks themselves were instituted.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1273.
Find related papers by JEL classification: G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
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