Company Ownership and Performance during the Czech Transformation

This paper focuses on ownership structure and firm performance following the privatization of state-owned firms in the Czech Republic in the 1990s. The ownership structures produced by Czech privatization are presented in detail, both during the privatization period (1990-1995) and after privatization (from 1996). This presentation goes beyond analyzing what firms were technically "private" to analyze the potential power of the state to control "private" firms. The main conclusion is that the state had a larger control potential than previously suggested. This forms a backdrop for a review of the literature on firm performance in the Czech Republic during and after privatization, exploring the impact of the division of large enterprises before privatization, the relative success of different kinds of owners after privatization, the performance of banks and the supposed benefits of Foreign Direct Investment. The Czech experience leads to the conclusion that there are many institutional factors that determine the success of privatization, and privatization programs currently being put into place in other countries should consider all these factors.