This paper examines how formerly state-owned enterprises are governed in a post-Communist economy. Privatization was intended to clarify ownership rights by making private property the basis for productive relations. Inreality, governments still own substantial percentages of share capital in "privatized" enterprises. and the question of who controls the company often remains unclear. Two dimensions of emerging corporate-governance structures are examined for enterprises under joint public-private ownership: contract enforcement and the influence of the state-asshareholder. The main argument is that these structures are determined according to government-investor negotiations over how to relinquish control of firms and privatize their cash flows, and proceeds in two steps. First, state authorities and prospective investors commit to the terms of privatization. Second, instruments of contract enforcement and state influence emerge from these commitments through bargaining. Evidence from two industry cases in the Czech Republic-steel and petrochemicals-shows that contract-enforcement is delegated to a third party when a government cannot credibly commit to all the privatization terms desired ex ante by investors who prefer long-term, Jargebloc equities; additionally, the state's fiduciary influence will be limited if ministries and property agencies are politically unified. Delegating contractual responsibility while limiting state discretion will make progress in establishing property rights. • An earlier version of this paper was delivered at the annual meeting of the American Political Science Association, Chicago. September 1995 .. The author is grateful for comments from Peter Hall. Joel Hellman. Grzegorz Ekiert, and the participants of the Seminar on Post-Communist Institutions (Russian Research Center). and the Workshop on East European Politics (Center for European Studies). Harvard University.
Original Title
Governing Enterprises in Transition Economies: The Problem of Mixed Ownership in the Czech Republic (PCEE 36,1995) Raj M. Desai
This paper examines how formerly state-owned enterprises are governed in a post-Communist economy. Privatization was intended to clarify ownership rights by making private property the basis for productive relations. Inreality, governments still own substantial percentages of share capital in "privatized" enterprises. and the question of who controls the company often remains unclear. Two dimensions of emerging corporate-governance structures are examined for enterprises under joint public-private ownership: contract enforcement and the influence of the state-asshareholder. The main argument is that these structures are determined according to government-investor negotiations over how to relinquish control of firms and privatize their cash flows, and proceeds in two steps. First, state authorities and prospective investors commit to the terms of privatization. Second, instruments of contract enforcement and state influence emerge from these commitments through bargaining. Evidence from two industry cases in the Czech Republic-steel and petrochemicals-shows that contract-enforcement is delegated to a third party when a government cannot credibly commit to all the privatization terms desired ex ante by investors who prefer long-term, Jargebloc equities; additionally, the state's fiduciary influence will be limited if ministries and property agencies are politically unified. Delegating contractual responsibility while limiting state discretion will make progress in establishing property rights. • An earlier version of this paper was delivered at the annual meeting of the American Political Science Association, Chicago. September 1995 .. The author is grateful for comments from Peter Hall. Joel Hellman. Grzegorz Ekiert, and the participants of the Seminar on Post-Communist Institutions (Russian Research Center). and the Workshop on East European Politics (Center for European Studies). Harvard University.
This paper examines how formerly state-owned enterprises are governed in a post-Communist economy. Privatization was intended to clarify ownership rights by making private property the basis for productive relations. Inreality, governments still own substantial percentages of share capital in "privatized" enterprises. and the question of who controls the company often remains unclear. Two dimensions of emerging corporate-governance structures are examined for enterprises under joint public-private ownership: contract enforcement and the influence of the state-asshareholder. The main argument is that these structures are determined according to government-investor negotiations over how to relinquish control of firms and privatize their cash flows, and proceeds in two steps. First, state authorities and prospective investors commit to the terms of privatization. Second, instruments of contract enforcement and state influence emerge from these commitments through bargaining. Evidence from two industry cases in the Czech Republic-steel and petrochemicals-shows that contract-enforcement is delegated to a third party when a government cannot credibly commit to all the privatization terms desired ex ante by investors who prefer long-term, Jargebloc equities; additionally, the state's fiduciary influence will be limited if ministries and property agencies are politically unified. Delegating contractual responsibility while limiting state discretion will make progress in establishing property rights. • An earlier version of this paper was delivered at the annual meeting of the American Political Science Association, Chicago. September 1995 .. The author is grateful for comments from Peter Hall. Joel Hellman. Grzegorz Ekiert, and the participants of the Seminar on Post-Communist Institutions (Russian Research Center). and the Workshop on East European Politics (Center for European Studies). Harvard University.
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