The Sale of Shares to Foreign Companies

Eastern Europe is now experiencing a very difficult transformation which involves all institutional levels. The creation of a viable private sector seems to be the most important and most complex aspect of such transformation. The debate over the obstacles and problems created by such a task has focused on many aspects, such as the creation of a credit market and of a stock market, the managerial structure and the effects of concentration. The essence of the problem remains, however, how to privatize existing firms. For larger industrial firms the answer is even more difficult, since there is a large number of potential buyers of their shares: current workers in the firms, mutual funds, holding companies, banks, pension funds, citizens, government or foreigners. Foreign companies are very appealing potential buyers, since through ownership they could have an incentive to transfer much needed technological and managerial skills.