| Abstract: | This paper investigates the process by which East German enterprises have been privatized and their resulting ownership and control structure. A corporate system with a very high level of concentration of ownership has been created. This is particularly closely associated with ownership and direct control by West German companies. The paper argues that this has allowed East German enterprises to gain access to finance, markets, and managerial skills which they might otherwise have been denied. The resulting "insider" system of corporate control will over time allow East German companies to participate in the control of their own and West German companies. The Treuhandanstalt has organized the privatization process to achieve certain industrial and social objectives. It has broken up the large multiplant enterprises to an extent that East German enterprises are now smaller than their West German counterparts. It has used informal liquidations rather than formal bankruptcies to be able to achieve its objectives. Privatizations have not involved the flotation of companies on the stock market. Instead, the Treuhand has arranged share and asset transfers on a scale which is in excess of merger activity commonly observed in the West. J. Japan. Int. Econ., Dec. 1995, 9(4), pp. 426–453. University College London, Wissenschaftszentrum Berlin, and CEPR; Oxford University and CEPR |
