Ownership and the Temptation to Loot: Evidence from Privatized Firms in the Czech Republic

Posted: 9 Feb 2003

See all articles by Robert Cull

Robert Cull

World Bank - Development Research Group (DECRG)

Jana Matesová

affiliation not provided to SSRN

Mary M. Shirley

World Bank - Development Research Group (DECRG)

Abstract

Using a new dataset on firms privatized in the Czech Republic from 1993 to 1996, we show that, even after controlling for size and structure, voucher-privatized joint stock companies perform worse than firms with concentrated shareholdings that had to be purchased for cash, i.e., limited liability companies and foreign joint stock companies. We argue that static asset stripping, or tunneling in Czech parlance, was combined with dynamic looting of the Akerlof and Romer (1993) type because these same joint stock companies had privileged access to soft credit from state controlled banks. Although we do not have direct evidence of looting, we show that liabilities increased at a much faster rate in joint stock companies than in limited liability companies.

JEL Classification: L2, G3, K4

Suggested Citation

Cull, Robert and Matesová, Jana and Shirley, Mary M., Ownership and the Temptation to Loot: Evidence from Privatized Firms in the Czech Republic. Journal of Comparative Economics, Vol. 30, No. 1 pp. 1-24. Available at SSRN: https://ssrn.com/abstract=316589

Robert Cull (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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HOME PAGE: http://econ.worldbank.org/staff/rcull

Jana Matesová

affiliation not provided to SSRN

Mary M. Shirley

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Policy Research Department
Washington, DC 20433
United States
202-473-7483 (Phone)
202-522-1155 (Fax)

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