Why Ownership Matters?: Politicization and Entrepreneurship in the Restructuring of Enterprises in Central Europe

This paper, base on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, examines the sources of performance differences between state and privatized firms, particularly those that may be due to politicization and differences in the degree of entreprenurship. The paper presents empirical evidence that politicization of decision making is responsible for the observed inefficiencies in the cost behavior of state enterprises, but does not explain their inferior revenue performance, which is independent of the degree of state involvement.OWNERSHIP ; PRIVATIZATION ; HUMAN CAPITAL

Why Ownership Matters? Entrepreneurship and the Restructuring of Enterprises in Central Europe

This paper, based on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, seeks to explain the reasons behind the marked impact of ownership on firm performance which has been observed in a number of studies in Eastern Europe and other parts of the world. Focusing in particular on the differential impact of ownership on revenue and cost performance, the paper argues that privatized firms controlled by outside investors are more entrepreneurial than those controlled by corporate insiders or the state. The paper provides evidence that all state and privatized firms in transition economies engage in similar types of restructuring, but that product restructuring by firms owned by outsider investors is significantly more effective (in terms of revenue generation) than that by firms with other types of ownership. The paper also examines the impact of managerial turnover on revenue performance, as well as differences among managers of firms with different types of ownership, and concludes that the more entrepreneurial behavior of outsider-owned firms is due primarily to incentive effects, rather than human capital effects, of privatization. More specifically, the authors argue that the success of outsider-owned firms is due to their greater readiness to accept risks (as evidenced by the higher variance of the revenues generated by restructuring) and a lesser need to defend, and account for, their managerial decisions.OWNERSHIP; PRIVATIZATION; POLITICIZATION; ENTREPRENEURSHIP; INCENTIVES; HUMAN CAPITAL

The Limits of Discipline: Ownership and Hard Budget Constraints in the Transition Economies

This paper argues that the imposition of financial discipline is not sufficient to remedy ownership and governance-related deficiencies of corporate performance. Using evidence from the postcommunist transition economies, the paper shows that a policy of hard budget constraints falters when state firms, because of inferior revenue performance and lesser willingness to meet payment obligations, continue to pose higher credit risk than privatized firms. The brunt of state firms' lower creditworthiness falls on state creditors. But the "softness" of these creditors is unavoidable if it prevents a demise of firms that are in principle capable of successful restructuring through ownership changes.OWNERSHIP; FINANCIAL DISCIPLINE; PERFORMANCE; TRANSITION.

Investing in Insider-Dominated Firms; A Study of Russian Voucher Privatization Funds

Enterprises; privatization, investments

The Re-Emerging Role of the State in Contemporary Russia

I examine ownership structure of Russian firms during the 1998-2006 period, where a greater emphasis is placed on motivations behind increased government ownership in the latter years, when oligarchs' opportunistic influence on the firm diminished as state ownership correspondingly increased. As this phenomenon is also correlated with improved corporate growth during the period, I argue that state participation in corporate governance acted as an effective substitute mechanism to constrain wealth-tunnelling behaviour of corporate insiders and local bureaucrats in a country defined by a weak property rights system. © 2012 Springer-Verlag