Implications on corporate governance
Institute of Economics, Bulgarian Academy of Sciences,
Keywords Bulgaria, Privatization, Corporate governance, Financial institutions
Abstract Striving to shorten the time-period necessary for the huge transfer of the property
needed by the ongoing economic reforms, Bulgaria developed a mass privatisation scheme (MPS).
Based on speciﬁc ﬁnancial intermediaries called privatisation funds (PF) that scheme encounters a
major problem – to facilitate the establishment of an effective system for corporate governance of
the privatised companies. Can it succeed in resolving that problem? This paper provides an analysis
of mass privatisation objectives, the legal and economic frameworks of privatisation, funds’
activities, their goals and portfolio structures. It examines the types of funds’ founders and the
presence of different groups among their shareholders. Additionally, it outlines the role of ﬁnancial
institutions in the process. The study is based on the PFs’ prospectus for capital rise. Its results
should not be seen as ﬁnal, since the process is competitive, and not all funds will be able to achieve
what they strive for in their prospectus.
Striving to shorten the time period necessary for the huge transfer of the
property needed by the ongoing economic reforms, almost all CEE countries
developed mass privatisation schemes (MPS). All those schemes are based on
speciﬁc ﬁnancial intermediaries named differently in each country. Besides the
important functions they have to play in the mechanics of the process –
collecting and exchange of vouchers against the acquired assets from the
privatised companies – those institutions are expected to perform another,
even more important role – to establish an effective system for corporate
governance over the privatised companies.
The main questions associated with the implementation of MPS emerge at
that point – is it justiﬁable to expect those institutions to be capable and
willing to exert control and monitoring over the enterprises they hold stakes in,
if they do not normally perform that function in the developed market
economies? Could one hope that given the speciﬁcs in transforming economies,
those institutions would change their behaviour and what this change would
be? Is it possible to guide the institution’s activity in a targeted direction by a
special regulation, and what type should it be?
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The research on this paper is supported by ACE Program of the EC, project No P95-2043-R.
Thanks are given to Juergen Backhaus, Frank Stephen and the other participants in Prague
Workshop, 16-19 January 1997 for many useful comments.
Journal of Economic Studies
Vol. 30 No. 3/4, 2003
q MCB UP Limited