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Chapter 16: Privatization and Corporate Governance in Transition Economies: Theory and Concepts
16 Privatization and corporate governance in transition economies: theory and concepts Igor Filatotchev Introduction After many decades of centrally planned and state-controlled development, managers of industrial companies in the former command economies are now confronted by a growing pressure to restructure their organizations that aﬀects, to diﬀerent extents, all major sectors in the former command economies (Puﬀer, 1994). Although there may be diﬀerent causes of this problem (the collapse of a highly integrated system of production and distribution, competition from imports, severe cuts in state subsidies and defence spending and so on), it produces a serious threat to an organization’s viability when managers fail to diagnose successfully the causes of their ﬁrm’s decline and respond with strategies appropriate for the demands of an evolving and changing environment (Peng and Heath, 1996). Large-scale privatization was expected to enhance restructuring in failing SOEs through the elimination of the major constraints on managerial actions imposed by state ownership and central planning (Boycko et al., 1995). Privatization has been an important tool of economic reform throughout former Communist Bloc countries, although particular privatization modes diﬀered from country to country. For example, Hungary focused on sales of state assets to foreign owners, whereas the Czech and Slovak Republics employed equal-access voucher privatization (see Carlin and Aghion, 1996, for a summary of privatization programmes in Central and Eastern Europe). Russia used a combination of voucher insider privatization with auction sales of shares in former state-owned companies to outside individual and institutional...
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