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The Impact of Czech Privatisation Methods on Enterprise Performance Incorporating Initial Selection Bias Correction

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  • A. Marcincin
  • S. van Wijnbergen

Abstract

Governments with transitional economies have applied different privatisation methods, from an almost free distribution to the direct sales of state assets. While a free distribution was believed to ensure the political feasibility of the program and its fairness, direct sales, or more generally, standard privatisation methods had a significant advantage in creating concentrated ownership structures as the prerequisite to corporate control and restructuring. Many economists believe that the two goals of mass privatisation, political feasibility and creation of proper ownership incentives, contradict each other and recent empirical comparisons of enterprises seem to support their view. However, all empirical works have been based on the weak assumption that privatisation methods were applied on a randomly selected samples of enterprises, which then allowed for a direct comparison between these enterprises. Our main claim is that governments indeed selected enterprises non-randomly and therefore, the resulting selection bias must be incorporated into the analyses. To show this, we apply a Heckman two-step regression method on a sample of 559 Czech enterprises. The main point of this paper then is that performance is influenced by the selection process and combination of vouchers with outsider owners is preferred over 100% voucherisation.

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Paper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 9704.

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Date of creation: 1997
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Handle: RePEc:hwe:certdp:9704

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  1. M Belka & S Estrin & M Schaffer & I.J. Singh, 1995. "Enterprise Adjustment in Poland: Evidence from a Survey of 200 Private," CEP Discussion Papers dp0233, Centre for Economic Performance, LSE.
  2. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  3. Roland, Gerard & Verdier, Thierry, 1994. "Privatization in Eastern Europe : Irreversibility and critical mass effects," Journal of Public Economics, Elsevier, vol. 54(2), pages 161-183, June.
  4. Claessens, Stijn, 1995. "Corporate governance and equity prices : evidence from the Czech and Slovak Republics," Policy Research Working Paper Series 1427, The World Bank.
  5. Marcincin, Anton & van Wijnbergen, Sweder, 1995. "Voucher Privatization, Corporate Control and the Cost of Capital: An Analysis of the Czech Privatization Programme," CEPR Discussion Papers 1215, C.E.P.R. Discussion Papers.
  6. Aghion, Philippe & Blanchard, Olivier J & Carlin, Wendy, 1994. "The Economics of Enterprise Restructuring in Central and Eastern Europe," CEPR Discussion Papers 1058, C.E.P.R. Discussion Papers.
  7. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  8. Dewatripont, M & Roland, G, 1992. "The Virtues of Gradualism and Legitimacy in the Transition to a Market Economy," Economic Journal, Royal Economic Society, vol. 102(411), pages 291-300, March.
  9. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  10. Riboud, Michelle & Hong Tan & Revenga, Ana, 1992. "The impact of Mexico's retraining program on employment and wages," Policy Research Working Paper Series 1013, The World Bank.
  11. Greene, William H, 1981. "Sample Selection Bias as a Specification Error: Comment," Econometrica, Econometric Society, vol. 49(3), pages 795-98, May.
  12. Rodrik, Dani, 1989. "Promises, Promises: Credible Policy Reform via Signalling," Economic Journal, Royal Economic Society, vol. 99(397), pages 756-72, September.
  13. Anton Marcinèin, 1995. "Korporatívne riadenie a jeho vplyv na cenu akcii (Corporate Governance and Its Impact on Share Prices)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 45(8), pages 419-428, August.
  14. David Lipton & Jeffrey Sachs, 1990. "Privitization in Eastern Europe: The Case of Poland," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 293-342.
  15. Aghion, Philippe, 1993. "Economic reform in Eastern Europe : Can theory help?," European Economic Review, Elsevier, vol. 37(2-3), pages 525-532, April.
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Cited by:
  1. Ohlsson, Henry, 1998. "Ownership and Production Costs - Choosing Between Public Production and Contracting Out," Working Paper Series 1998:6, Uppsala University, Department of Economics.
  2. Jana Fidrmucova, 2000. "Channels of Restructuring in Privatized Czech Companies," Econometric Society World Congress 2000 Contributed Papers 1358, Econometric Society.
  3. Marc Duponcel, 1998. "Restructuring of food industries in the five Central and Eastern European front-runners towards EU membership (CEEC-5). A comparative review," CERT Discussion Papers 9806, Centre for Economic Reform and Transformation, Heriot Watt University.
  4. Jana P. Fidrmuc, 2006. "Channels of Restructuring in Privatized Czech Companies," Working Papers wpn06-18, Warwick Business School, Finance Group.
  5. Barbara Blaszczyk & Iraj Hashi & Alexander Radygin & Richard Woodward, 2003. "Corporate Governance and Ownership Structure in the Transition: The Current State of Knowledge and Where to Go from Here," CASE Network Studies and Analyses 0264, CASE-Center for Social and Economic Research.
  6. Marko Simoneti & Joze P. Damijan & Matija Rojec & Boris Majcen, 2004. "Case-by-case versus Mass Privatization in Transition Economies: Owner and Seller Effects on Performance of Firms in Slovenia," LICOS Discussion Papers 14304, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  7. Sweder van Wijnbergen & Tim Willems, 2012. "Learning Dynamics and the Support for Economic Reforms: Why Good News can be Bad," Tinbergen Institute Discussion Papers 12-043/2, Tinbergen Institute.
  8. Anderson, James H. & Korsun, Georges & Murrell, Peter, 2003. "Glamour and value in the land of Chingis Khan," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 34-57, March.
  9. Richard B. Goud Jr., 2002. "Ownership and Firm Performance: Evidence from 25 Countries in Central and Eastern Europe and the Former Soviet Union," Development and Comp Systems 0207002, EconWPA.
  10. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.

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