Working Paper: CEPR ID: DP1135
Authors: Irena Grosfeld; Gerard Roland
Abstract: This paper interprets the existing evidence on enterprise restructuring in Poland, Hungary and the Czech Republic. Despite differences in restructuring policies, the pattern of observed restructuring appears similar in the three countries. Contrary to initial expectations, managers of SOEs have engaged in significant adjustment activities. We argue that such behaviour is due to dramatic changes in the market environment of firms and in their perceived incentive structure. It appears, however, that the adjustment measures have mainly had a defensive character restricted to labour-shedding and downsizing activities. Strategic restructuring, involving thoughtful business projects and modernization investments, is much more limited. We argue that progress on strategic restructuring requires both progress in ownership transformation and in financial reform. A crucial role could be played by intermediaries playing the role of venture capital funds.
Keywords: restructuring; corporate governance; transition; central europe; privatization; managerial incentives
JEL Codes: G32; L21; P34; P52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased product market competition (L19) | defensive restructuring (G34) |
| hardening budget constraints (H60) | defensive restructuring (G34) |
| increased product market competition (L19) | managerial responses (M54) |
| hardening budget constraints (H60) | managerial responses (M54) |