The Choice of Privatization Method and the Financial Performance of Newly Privatized Firms in Transition Economies

There is a gap between the theoretical literature which almost unanimously advocates the privatization of enterprises, as part of the solution to the commitment problem in economies in transition, and the empirical evidence regarding the best way to design a privatization program in order to secure an efficient use of resources. This paper contributes to this debate by focusing on the determinants of the financial long-run performance of privatized firms in Poland, Hungary, and the Czech Republic. This long-run performance is mainly influenced by the extent of retained state ownership, the choice of privatization method, and firm size. Copyright Blackwell Publishers Ltd, 2003.