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Defensive and Strategic Restructuring in Central European Enterprises

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  • Grosfeld, Irena
  • Roland, Gérard

Abstract

This paper interprets the existing evidence on enterprise restructuring in Poland, Hungary and the Czech Republic. Despite differences in restructuring policies, the pattern of observed restructuring appears similar in the three countries. Contrary to initial expectations, managers of SOEs have engaged in significant adjustment activities. We argue that such behaviour is due to dramatic changes in the market environment of firms and in their perceived incentive structure. It appears, however, that the adjustment measures have mainly had a defensive character restricted to labour-shedding and downsizing activities. Strategic restructuring, involving thoughtful business projects and modernization investments, is much more limited. We argue that progress on strategic restructuring requires both progress in ownership transformation and in financial reform. A crucial role could be played by intermediaries playing the role of venture capital funds.

Suggested Citation

  • Grosfeld, Irena & Roland, Gérard, 1995. "Defensive and Strategic Restructuring in Central European Enterprises," CEPR Discussion Papers 1135, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1135
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    Keywords

    Central Europe; Corporate Governance; Managerial Incentives; Privatization; Restructuring; Transition;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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