Ownership Structure and the Temptation to Loot : Evidence from Privatized Firms in the Czech Republic
Using a new data set on privatized firms in the Czech Republic, the authors examine how the design of privatization affects outcomes. Earlier studies of privatization in the Czech Republic focused largely on how the broad distribution of shares thr...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2001/03/1047468/ownership-structure-temptation-loot-evidence-privatized-firms-czech-republic http://hdl.handle.net/10986/19690 |
| Summary: | Using a new data set on privatized firms
in the Czech Republic, the authors examine how the design of
privatization affects outcomes. Earlier studies of
privatization in the Czech Republic focused largely on how
the broad distribution of shares through vouchers may have
motivated the new owners to strip assets from the privatized
firms. The authors find evidence for static asset stripping,
but also for what Akerlof and Romer (1993) call looting -
borrowing heavily with no intent to repay and using the
loans for private purposes. This looting occurred because
the larger privatized companies had privileged access to
credit from state-controlled banks, which had little
incentive to enforce debt contracts. The policy implications
are significant: financial incentives and regulation are as
important as ownership structure in the design of privatization. |
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