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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 21, No. 2, pp.285-310
ISSN: 1225-0279 (Print)
Print publication date 31 May 2008
Received 21 Dec 2007 Revised 28 Jan 2008

Company Ownership and Performance during the Czech Transformation

Evzen Kocenda
Professor, CERGE-EI, Charles University and the Academy of Sciences, Prague, Czech Republic, The William Davidson Institute, Michigan, CEPR, London, and Euro Area Business Cycle Network. CERGE-EI, Politickych veznu 7, P.O. Box 882, 111 21 Prague, Czech Republic, Tel: +420-224-005-149, Fax: +420-224-227-143 evzen.kocenda@cerge-ei.cz

JEL Classification: D24, C23, O47

Abstract

This paper focuses on ownership structure and firm performance following the privatization of state-owned firms in the Czech Republic in the 1990s. The ownership structures produced by Czech privatization are presented in detail, both during the privatization period (1990-1995) and after privatization (from 1996). This presentation goes beyond analyzing what firms were technically “private” to analyze the potential power of the state to control “private” firms. The main conclusion is that the state had a larger control potential than previously suggested. This forms a backdrop for a review of the literature on firm performance in the Czech Republic during and after privatization, exploring the impact of the division of large enterprises before privatization, the relative success of different kinds of owners after privatization, the performance of banks and the supposed benefits of Foreign Direct Investment. The Czech experience leads to the conclusion that there are many institutional factors that determine the success of privatization, and privatization programs currently being put into place in other countries should consider all these factors.

Keywords:

Privatization, Corporate performance, Ownership structure, Economic transformation, Banking, Foreign direct investments

Acknowledgments

I would like to thank Hyunbae Chun, Jan Hanousek, Il-Dong Koh, Tigran Poghosyan, Juraj Stancik, Richard Stock, and participants at the Conference on Experience of Transition Economies and Implications for North Korea (Seoul, 2008) for helpful comments. Financial support from GACR grant No. 402/06/1293 is gratefully acknowledged. The usual disclaimer applies.

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