Defensive and Strategic Restructuring in Central European Enterprises

Irena Grosfeld and Gérard Roland

No 1135, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper interprets the existing evidence on enterprise restructuring in Poland, Hungary and the Czech Republic. Despite differences in restructuring policies, the pattern of observed restructuring appears similar in the three countries. Contrary to initial expectations, managers of SOEs have engaged in significant adjustment activities. We argue that such behaviour is due to dramatic changes in the market environment of firms and in their perceived incentive structure. It appears, however, that the adjustment measures have mainly had a defensive character restricted to labour-shedding and downsizing activities. Strategic restructuring, involving thoughtful business projects and modernization investments, is much more limited. We argue that progress on strategic restructuring requires both progress in ownership transformation and in financial reform. A crucial role could be played by intermediaries playing the role of venture capital funds.

Keywords: Central Europe; Corporate Governance; Managerial Incentives; Privatization; Restructuring; Transition (search for similar items in EconPapers)
JEL-codes: G32 L21 P34 P52 (search for similar items in EconPapers)
Date: 1995-03
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Citations: View citations in EconPapers (29)

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Working Paper: Defensive and Strategic Restructuring in Central European Enterprises (1995)
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