Enterprise Breakups and Performance During the Transition

Posted: 27 Apr 2001

See all articles by Lubomir Lizal

Lubomir Lizal

Czech Technical University - Faculty of Electrical Engineering; Anglo-American University; Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Miroslav Singer

Expandia Holdings Group; Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

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Abstract

Using firm-level data, we estimate the effects of the major wave of 1991 breakups of Czechoslovak state-owned enterprises on the subsequent performance of the "master enterprises" and spun-off divisions. We estimate the performance effects of spinoffs by comparing the performance of enterprises that remained intact throughout the 1990-1992 period to the performance of the master enterprises that experienced spinoffs and the newly spun-off subsidiaries. Our estimates suggest that the breakups had a significant immediate effect on the productive efficiency and on the profitability of industrial firms in 1991, and that the effect became much less significant in 1992. The effect is a negative function of the size of the spinoff, being positive for small to slightly above average sized spinoffs and negative for very large ones. We cannot reject the hypothesis that the estimated effect was identical for the spun-off subsidiaries and the master enterprises that experienced the spinoffs. Our 1991 estimates suggest that the large firms created under the centrally planned system suffered from inefficiencies that were alleviated by the breakups. The 1992 estimates are consistent with increased competition and the appropriation of profits by managers.

JEL Classification: D21, D24, L11, P11

Suggested Citation

Lizal, Lubomir and Singer, Miroslav and Svejnar, Jan, Enterprise Breakups and Performance During the Transition. Available at SSRN: https://ssrn.com/abstract=268268

Lubomir Lizal (Contact Author)

Czech Technical University - Faculty of Electrical Engineering ( email )

Technicka 2
Jug. Partyzanu 3
Prague 6, 166 27
Czech Republic

Anglo-American University ( email )

Lazenska 4
11800 Praha 1
Prague 1, 11800
Czech Republic

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic
+420 2 2400 5114 (Phone)
+420 2 2422 7143 (Fax)

HOME PAGE: http://www.cerge-ei.cz

Miroslav Singer

Expandia Holdings Group ( email )

Na Prikope 19
117 19 Prague 1
Czech Republic

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

P.O. Box 882
7 Politickych veznu
111 21 Prague 1, Prague
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

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