The Financial Performance of Privatised Firms: Evidence from Three Transition Economies

Abstract

There is a gap between the theoretical literature which almost unanimously advo-cates privatisation of enterprises, as a part of the solution for the commitment prob-lem in economies in transition, and empirical evidence on how best to design a pri-vatisation programme in order to secure an efficient use of resources. This paper contributes to this debate by focusing on the determinants of financial performance of privatised firms in Poland, Hungary, and the Czech Republic. Our results suggest positive long-term returns for foreign investors in newly privatised companies. The returns are particularly high and statistically significant for investors in Polish com-panies. The long-term performance is influenced by firms? size, retained state own-ership, and the choice of a privatisation method.