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Restructuring of Large Firms in Slovakia

Author

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  • Simeon Djankov
  • Gerhard Pohl

Abstract

This paper examines case study evidence of large Slovak firms chosen to represent a wide range of initial conditions, privatization techniques and success with restructuring. We document the ownership changes and restructuring actions of firms. We then re-examine several hypotheses about firm restructuring in the light of this new evidence. In particular, we show that the majority of large Slovak firms have successfully restructured in the absence of foreign investors and government-led restructuring programs. The study also throws some new queries on the effectiveness of different privatization methods in enhancing corporate governance and improving access to skills and capital. We 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 evidence also suggests that the mass privatization program did not result in weak corporate governance since it was followed by a rapid consolidation of ownership. Our findings support the view that the main objective of privatization programs should be the speedy transformation of ownership, not the selection of perfect owners.

Suggested Citation

  • Simeon Djankov & Gerhard Pohl, 1997. "Restructuring of Large Firms in Slovakia," William Davidson Institute Working Papers Series 73, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1997-73
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39463/3/wp73.pdf
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    Cited by:

    1. Tito Boeri, 1999. "Transition with Labour Supply," William Davidson Institute Working Papers Series 274, William Davidson Institute at the University of Michigan.
    2. Debora Revoltella, 2001. "Financing Enterprises in the Czech Republic: Debt and Firm-specific Variables," Economic Change and Restructuring, Springer, vol. 34(3), pages 231-246, October.
    3. Alexander Pivovarsky, 2001. "How Does Privatization Work? Ownership Concentration and Enterprise Performance in Ukraine," IMF Working Papers 01/42, International Monetary Fund.
    4. Irina Akimova & Gerhard Schwödiauer, 1999. "Restructuring of Ukrainian Enterprises after Privatization: Does Ownership Structure Matter?," Industrial Organization 9903003, EconWPA.
    5. Pehr-Johan Norbäck & Lars Persson, 2012. "Privatization, investment, and ownership efficiency," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 765-786, October.
    6. O'Toole, Conor M. & Morgenroth, Edgar L.W. & Ha, Thuy T., 2016. "Investment efficiency, state-owned enterprises and privatisation: Evidence from Viet Nam in Transition," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 93-108.
    7. Claessens,Constantijn A.*Djankov, Simeon, 1998. "Politicians and firms in seven central and eastern European countries," Policy Research Working Paper Series 1954, The World Bank.
    8. Norbäck, Pehr-Johan & Persson, Lars, 2003. "Privatization and Restructuring in Concentrated Markets," Working Paper Series 605, Research Institute of Industrial Economics.
    9. repec:kap:iaecre:v:14:y:2008:i:2:p:215-227 is not listed on IDEAS
    10. Morris Bornstein, 2001. "Post-privatisation Enterprise Restructuring," Post-Communist Economies, Taylor & Francis Journals, vol. 13(2), pages 189-203.
    11. Frydman, Roman & Gray, Cheryl W. & Hessel, Marek & Rapaczynski, Andrzej, 1997. "Private ownership and corporate performance : some lessons from transition economies," Policy Research Working Paper Series 1830, The World Bank.
    12. Schröder, Philipp J.H., 2000. "On Privatisation and Restructuring," MPRA Paper 89, University Library of Munich, Germany, revised 2006.
    13. Helena Hannula & Katrin Tamm, 2002. "Restructuring And Efficiency In The Estonian Manufacturing Industry: The Role Of Foreign Ownership," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 15, Faculty of Economics and Business Administration, University of Tartu (Estonia), revised 2003.

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