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The restructuring of large firms in Slovakia

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  • Djankov, Simeon
  • Pohl, Gerhard

Abstract

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.

Suggested Citation

  • Djankov, Simeon & Pohl, Gerhard, 1997. "The restructuring of large firms in Slovakia," Policy Research Working Paper Series 1758, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1758
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    References listed on IDEAS

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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. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter.
    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. 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.
    5. Norbäck, Pehr-Johan & Persson, Lars, 2003. "Privatization and Restructuring in Concentrated Markets," Working Paper Series 605, Research Institute of Industrial Economics.
    6. repec:kap:iaecre:v:14:y:2008:i:2:p:215-227 is not listed on IDEAS
    7. Morris Bornstein, 2001. "Post-privatisation Enterprise Restructuring," Post-Communist Economies, Taylor & Francis Journals, vol. 13(2), pages 189-203.
    8. 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.
    9. Pehr-Johan Norbäck & Lars Persson, 2012. "Privatization, investment, and ownership efficiency," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 765-786, October.
    10. 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.
    11. Alexander Radygin & Revold Entov & Marina Turuntseva & Alena Gontmakher & Harry Swain & Jeff Carruthers & Karen Minden & Cheryl Urban, 2002. "The problems of corporate governance in Russia and its regions," Published Papers 12, Gaidar Institute for Economic Policy, revised 2002.
    12. Mr. Alexander Pivovarsky, 2001. "How Does Privatization Work? Ownership Concentration and Enterprise Performance in Ukraine," IMF Working Papers 2001/042, International Monetary Fund.
    13. 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.
    14. Kikeri, Sunita & Nellis, John, 2002. "Privatization in competitive sectors : the record to date," Policy Research Working Paper Series 2860, The World Bank.
    15. Irina Akimova & Gerhard Schwödiauer, 1999. "Restructuring of Ukrainian Enterprises after Privatization: Does Ownership Structure Matter?," Industrial Organization 9903003, University Library of Munich, Germany.
    16. Schröder, Philipp J.H., 2000. "On Privatisation and Restructuring," MPRA Paper 89, University Library of Munich, Germany, revised 2006.
    17. Jennifer Foo & Dorota Witkowska, 2008. "Transitional Progress and Business Challenges," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 14(2), pages 215-227, May.

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