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Econ Gov (2012) 13:121143
DOI 10.1007/s10101-011-0106-2
ORIGINAL PAPER
Received: 4 October 2010 / Accepted: 29 December 2011 / Published online: 7 January 2012 Springer-Verlag 2012
Abstract We analyze the effects of rm break-up on corporate performance. Our analysis is based on a unique data set for a large number of Czech rms spanning the period 19962000. We employ a propensity score matching procedure to deal with endogeneity problems. Our results, which are generally in line with the positive effects of rm break-up found in the developed-market literature, show that the initial effects of rm break-up are positive but after a certain point they disappear within a short time. Factors like changes in ownership structure or management are found to be behind later improvements in the performance of rms.
Keywords Break-up of rms Corporate performance Ownership changes
Privatization Emerging markets Endogeneity Propensity score matching procedure
JEL Classication D23 G32 G34 L20 M21 P47
1 Introduction
In the early 1990s the break-up of large state-owned enterprises (SOE) became one of the most important forms of restructuring in Central and Eastern European (CEE) economies as it reduced the size of rms, increased the number of rms, and brought in new management (Domadenik et al. 2012). We study this phenomenon on a sample of rms in the Czech Republic where break-up became the main form of early restructuring (Lizal et al. 2001). In this context, in our analysis we consider break-up as a means of initial rm restructuring. We contribute to the literature by analyzing the effect of the break-up on rm performance while also accounting for the potential
E. Kocenda (B) J. Hanousek
CERGE-EI, Charles University and Academy of Sciences, Politickych veznu 7, P.O. Box 882, 111 21 Prague, Czech Republic e-mail: [email protected]
Firm break-up and performance
Evzen Kocenda Jan Hanousek
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122 E. Kocenda, J. Hanousek
endogeneity of the break-up with respect to rm performance. Our results show that rm break-up has positive effects that vanish within a short time.
Since the break-up of rms served as a rst step in the restructuring pursued by the government, it can be hypothesized that initially the break-up of rms improved corporate performance as the new rms strived to establish themselves on the market and to improve corporate governance.1 Subsequent...