Enterprise Privatization and Ex Post Firm Performance in Post-Socialist Economies

Abstract

Abstract This chapter discusses the relationship between post-privatization ownership and firm performance in Central and Eastern Europe (CEE) and the former Soviet Union (FSU). Based on the literature of enterprise privatization, it predicts that CEE countries perform better than FSU countries in enterprise restructuring. It also assumes that (a) the voucher system is the worst privatization method; (b) direct sales are superior to management-employee buyouts (MEBOs); and (c) the speed of policy implementation is related to progress in firm restructuring. The chapter reports that a research synthesis of 2,894 estimates drawn from 121 previous studies support these hypotheses overall. The results also indicate that in CEE and the FSU countries, private entities were more desirable corporate owners compared to the state; therefore, privatization policy was an essential element for the restructuring of the former socialist companies in the transition economies. The chapter concludes that the lesson obtained from enterprise privatization in CEE and the FSU is that the policy design for enterprise privatization is crucial, but that whatever it is, the free transfer of state assets must be avoided at all costs.