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Enterprise Break-ups and Performance During the Transition

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  • Lizal, Lubomir
  • Singer, Miroslav
  • Svejnar, Jan

Abstract

This paper estimates the effects of the 1991 breakups of Czechoslovak state-owned enterprises (SOEs) on subsequent performance of the master enterprises and the spin-off units. The analysis is based on quarterly and annual data of Czechoslovak industrial enterprises. We estimate the performance effect of a spin-off by comparing the performance of enterprises that were present throughout the 1990–92 period, but did not experience any spin-offs, to that of: a) master enterprises that experienced spin-offs; and b) the new spin-off subsiduaries. The estimates suggest that the breakups had a significant immediate (1991) effect on productive efficiency and profitability of industrial firms. The effect was positive for small to slightly above-average size spin-offs and negative for large ones. The hypothesis that the estimated effect of spin-offs on performance was identical for the spin-off subsiduaries and the master enterprises that experienced the spin-offs cannot be rejected. The 1991 estimates thus strongly suggest that the large firms created under the centrally-planned system suffered from inefficiencies that were alleviated by the break-ups of these firms into smaller units.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1757.

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Date of creation: Dec 1997
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Handle: RePEc:cpr:ceprdp:1757

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Related research

Keywords: Breakup; Czechoslovakia; Firms; Spin-off; Transition;

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Cited by:
  1. Swati Basu & Saul Estrin & Jan Svejnar, 2000. "Employment and Wages in Enterprises Under Communism and in Transition: Evidence From Central Europe and Russia," William Davidson Institute Working Papers Series 440, William Davidson Institute at the University of Michigan.
  2. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  3. Svejnar, Jan, 2007. "China in Light of the Performance of Central and East European Economies," IZA Discussion Papers 2791, Institute for the Study of Labor (IZA).
  4. Lubomir Lizal, 2001. "Does a Soft Macroeconomic Environment Induce Restructuring on the Microeconomic Level during the Transition Period? Evidence from Investment Behavior of Czech Enterprises," Development and Comp Systems 0012010, EconWPA.
  5. Evžen Kocenda & Jan Hanousek, 2011. "Divide and Privatize: Firm Break-up and Performance," CESifo Working Paper Series 3465, CESifo Group Munich.
  6. Kikeri, Sunita & Nellis, John, 2002. "Privatization in competitive sectors : the record to date," Policy Research Working Paper Series 2860, The World Bank.
  7. Jana Fidrmucova, 2000. "Channels of Restructuring in Privatized Czech Companies," Econometric Society World Congress 2000 Contributed Papers 1358, Econometric Society.
  8. Jan Svejnar, 2006. "Strategies for growth : Central and Eastern Europe," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 205-233.

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