Privatization and Performance of the Czech Republic's Komerčnı́ Banka

Abstract

The transactional structure that created the Czech Republic's largest commercial bank determined the bank's management, endowed its massive loan portfolio, eschewed splitting the bank into smaller organizational units, and relied on voucher privatization. Most striking, however, is the government's continued control of Komerčnı́ Banka. The opportunity to privatize a strong bank and harden enterprise-level budget constraints was foregone, or postponed, in favor of maintaining a bank that would deal leniently with politically vested commercial clients. Komerčnı́ Banka's transactional structure and subsequent performance have, therefore, contributed to the Czech Republic's deliberate rather than quick move toward market-driven decision making.J. Comp. Econom.,August 1997,25(1), pp. 97–128. University of Michigan, Ann Arbor, Michigan 48109 and The William Davidson Institute at the University of Michigan Business School, Ann Arbor, Michigan 48109.