The Impact of Privatization on Company Performance in Transition Economies: an Evaluation

It is nearly twenty years since the process of transition in Central and Eastern Europe (CEE) began, and more than fifteen since privatization began in earnest. There has been considerable hypothesizing in the literature that the mechanisms of corporate governance that pertain under private ownership are better than those under state ownership, and hence that privatization would lead to superior enterprise performance (Estrin and Perotin, 1991; Megginson and Netter, 2001; Megginson, 2005). Privatization has been nowhere so extensive nor so rapid as in the former communist countries, so these represent an important laboratory for us to test the impact of privatization on company performance. In this chapter,1 I provide an overview of the findings from the huge economics literature that has emerged to explore this issue. I will concentrate on the former Soviet bloc but also consider the evidence that is now emerging from China.