Institutional Technology and the Chains of Trust: Capital Markets and Privatization in Russia and the Czech Republic

Bruce Kogut and Andrew Spicer

No 291, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: The introduction of mass privatization policies in Russia and the Czech Republic depended on the crea-tion of impersonal capital markets to finance the needs of privatized companies and to provide a secon-dary market for the trading of securities. Yet, mass privatization created the contradictory conditions of generating millions of poorly informed shareholders, with no efficient markets for the sale of the shares. The absence of financial markets created systematic pressures to move assets by illegal or non-transparent means to users who value them more. Privatization created the incentives to destroy the fi-nancial markets critical to its success. A comparative case analysis of post-privatization market forma-tion in both these countries demonstrates that the functional necessity for these markets does not engen-der their own creation. In the absence of institutional mechanisms of state regulation and trust, markets become arenas for political contests and economic manipulation. The irony of these policies is that a principal lesson has been that market reforms cannot create viable markets, only institutional formation can.

Pages: pages
Date: 2001-02-01
New Economics Papers: this item is included in nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp291.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp291.pdf [302 Found]--> https://wdi.umich.edu/files/Publications/WorkingPapers/wp291.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:2001-291

Access Statistics for this paper

More papers in William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109. Contact information at EDIRC.
Bibliographic data for series maintained by WDI ().