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Determinants of Performance of Manufacturing Firms in Seven European Transition Economies

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  • Stijn Claessens
  • Simeon Djankov
  • Gerhard Pohl

Abstract

We document the operational performance of (former and current) state enterprises over the 1992-1995 period for seven countries in Central and Eastern Europe (Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia, and Slovenia) using large samples of firm level data and a consistent methodology. We find that @ in the Czech Republic, Hungary, Poland, and Slovakia have the highest factor productivity growth and firms in Bulgaria and Romania the lowest, with firms in Slovenia in between. We find three factors which help explain the variation in firm performance: initial conditions (firm size, sector, and level of productivity), status of privatization, and quality of bank lending. Firms in tobacco, furniture, and paper improve faster than firms in other sectors, while firms in the textile, lumber, petroleum refining, rubber and non electrical machinery sectors improve slower than other firms. Firms with a lower initial level of factor productivity display higher productivity growth than other firms, suggesting convergence of productivity. Productivity growth is most often negatively correlated with firm size. Productivity growth is positively related to privatization in all countries, with firms privatized for two years displaying the most change. Finally, bank financing appears to have been increasingly allocated to more productive firms in all countries except Bulgaria and Romania.

Suggested Citation

  • 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.
  • Handle: RePEc:wdi:papers:1997-74
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    Cited by:

    1. Earle, John S. & Telegdy, Almos, 2002. "Privatization Methods and Productivity Effects in Romanian Industrial Enterprises," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 657-682, December.
    2. Simeon Djankov & Gerhard Pohl, 1998. "The restructuring of large firms in the Slovak Republic," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 67-85, May.
    3. 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.
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2809-2857 is not listed on IDEAS
    5. Frydman, Roman & Gary, Cheryl & Hessel, Marek & Rapaczynski, Andrzej, 1999. "The Limits of Discipline," Transition Economics Series 5, Institute for Advanced Studies.
    6. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.
    7. Svejnar, Jan, 1999. "Labor markets in the transitional Central and East European economies," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 42, pages 2809-2857 Elsevier.
    8. Djankov, Simeon & Pohl, Gerhard, 1997. "The restructuring of large firms in Slovakia," Policy Research Working Paper Series 1758, The World Bank.

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