The restructuring of large firms in Slovakia
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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