Forging ahead: Privatization and restructuring of Czech steel firms during the transition to a market economy

This study examines privatization and restructuring of Czech steel firms during the transition to a market economy during the period 1990--96. Using a sample of five Czech steel firms, the study examines why some firms restructured more successfully, and performed better economically, than others during and after privatization and constraints, access to capital and technology, and environmental regulations.;Chapter 1 surveys the relevant literature on firm restructuring, privatization and economic reform. Chapter 2 discusses the post-war development of the Czech steel economic reform in the Czech Republic. Several factors are examined to explain the variation in firm restructuring among Czech steel mills: the method and speed of privatization, the extent of ownership concentration, the degree of hard budget industry and economic reform and privatization in the Czech Republic after 1990.;Chapter 3 develops an index of restructuring using nine quantitative and qualitative indicators. The index demonstrates that, despite similar initial conditions and paths of institutional development under communism, the five steel mills varied significantly in their ability to restructure and improve performance.;Chapter 4 examines two hypotheses that might explain this variation. Using empirical evidence, the chapter tests the hypothesis that hard budget constraints are a necessary and sufficient condition for firm restructuring. Finding that this hypothesis fails to explain variations in firm restructuring, additional empirical evidence is used to test the hypothesis that ownership concentration improves firm restructuring. The chapter demonstrates that private ownership concentration in particular is a necessary prerequisite for restructuring among Czech steel firms.;Chapter 5 investigates firms' access to capital and technology using data on indebtedness, ratios of long and short-term debt, and new share issues. The chapter demonstrates that capital and technology bottlenecks do not provide a convincing explanation of the variation in firm restructuring. Chapter 6 examines the impact of environmental regulations on firm performance, and finds that credible, market based regulations spurred restructuring at all firms. Chapter 7 concludes by examining theoretical and policy implications of the study.