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The restructuring of large firms in Slovakia

  • Djankov, Simeon
  • Pohl, Gerhard

The restructuring of large enterprises has received much attention in the transition of centrally planned economies to market economies. The need to transform these enterprises into viable firms is widely acknowledged. The extent of such restructuring and the determinants that underlie a successful transformation are less studied. Various schemes for dealing with large enterprises have been tried. The effect of such programs is hard to measure since the restructuring of enterprises (or the lack thereof) has taken place in the context of significant changes in the overall economic environment. Notwithstanding the difficulty in such measurement, a proper evaluation is crucial for designing further reform policies. This paper extends the literature on the microeconomics of transition by re-examining the stylized facts about firm restructuring in the light of new empirical evidence. The study is based on twenty-one case studies of Slovak firms and uses detailed financial information for the 1991-96 period and interviews with top management. A large part of sample represents firms that were initially classified as non-viable loss-makers. This study also throws some new queries on the effectiveness of different privatization methods in enhancing corporate governance and improving access to skills and capital. Author find that privatization to insiders through management-employee buy-outs did not hamper firm restructuring as the new owners (old managers) invested heavily in new technology, laid off substantial part of their workforce, sought foreign partnerships, and were prepared to sell controlling stakes to outsiders in return for fresh financial resources. The main objective of the privatization program should be the speedy transformation of ownership, not the selection of perfect owner.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1758.

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Date of creation: 30 Apr 1997
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Handle: RePEc:wbk:wbrwps:1758
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  1. E, S & G, A & S, I, 1995. "Shocks and Adjustment by Firms in Transition: A Comparative Study," Journal of Comparative Economics, Elsevier, vol. 21(2), pages 131-153, October.
  2. Brian Pinto & Marek Belka & Stefan Krajewski, 1993. "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 213-270.
  3. Stijn Claessens & Simeon Djankov & Gerhard Pohl, 1997. "Determinants of Performance of Manufacturing Firms in Seven European Transition Economies," William Davidson Institute Working Papers Series 74, William Davidson Institute at the University of Michigan.
  4. Claessens, Stijn & Djankov, Simeon & Pohl, Gerhard, 1997. "Ownership and corporate governance : evidence from the Czech Republic," Policy Research Working Paper Series 1737, The World Bank.
  5. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  6. Blanchard, Olivier, 1996. "Theoretical Aspects of Transition," American Economic Review, American Economic Association, vol. 86(2), pages 117-22, May.
  7. Sachs, Jeffrey D, 1996. "The Transition at Mid Decade," American Economic Review, American Economic Association, vol. 86(2), pages 128-33, May.
  8. Svejnar, Jan, 1996. "Enterprises and Workers in the Transition: Econometric Evidence," American Economic Review, American Economic Association, vol. 86(2), pages 123-27, May.
  9. Lubomir Lizal & Miroslav Singer & Jan Svejnar, 1996. "Enterprise Restructuring and Performance in the Transition," William Davidson Institute Working Papers Series 13, William Davidson Institute at the University of Michigan.
  10. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
  11. Pohl, G. & Djankov, S. & Anderson, R.E., 1996. "Restructuring Large Industrial Firms in Central and Eastern Europe: An Empirical Analysis," Papers 332, World Bank - Technical Papers.
  12. Wendy Carlin & John Van Reenen & Toby Wolfe, 1995. "Enterprise restructuring in early transition: the case study evidence from Central and Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 427-458, December.
  13. Caves, Richard E., 1990. "Lessons from privatization in Britain : State enterprise behavior, public choice, and corporate governance," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 145-169, March.
  14. Djankov, Simeon & Hoekman, Bernard, 1997. "Trade reorientation and productivity growth in Bulgarian enterprises," Policy Research Working Paper Series 1707, The World Bank.
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