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INTRODUCTION
Mass privatization (MP) programs have been carried out in many transition countries, including Bulgaria, Russia and the Czech Republic. These programs had several purposes. Given that these countries had very large state sectors, MP provided a means for rapidly privatizing these sectors. Also in countries where citizens had limited resources to buy these state companies, these MP programs provided a means of transferring these assets to the population at large.
In Bulgaria, MP occurred after attempts to use cash privatization and management-employee buyouts provided only limited privatization. The first wave of the MP program, which was the only part that resulted in significant privatization, was completed in June 1997. About one-fourth of Bulgaria's state-owned enterprises (1,040) were partially privatized through the program. While this represented less than one-sixth of the estimated assets of the state enterprise sector, the MP program privatized twice as many assets as had been previously privatized through other programs.1
It was difficult to evaluate the MP program immediately after the program was completed. Most companies in the MP program had suffered from deterioration of their existing capital stock and needed capital infusions. Also there was a major financial crisis with very high inflation at the time of the MP program. This made it difficult to evaluate the potential viability of the firms that were auctioned. Several years have passed since the program was completed so it is now possible to evaluate the program. We investigate two aspects of the program: (1) How well have the firms that were privatized through the program performed since privatization? Did they perform better or worse than firms that were privatized through other programs, that is cash privatization, management-employee buyouts, etc? (2) Did the program succeed in passing valuable assets to the public? Were valuable ownership rights established for new shareholders? This second question is particularly important in establishing the legitimacy of the program since the program was sold to the public as a means of sharing the wealth that was previously under state control.2
While there have been many criticisms of MP programs in other countries, the Bulgaria MP program had several advantages. Because the program was carried out after programs had already been implemented in other countries, the Bulgarians were able...