Corporate Governance, Ownership Concentration and Foreign Direct Investment in the Czech Republic

Abstract

Any in-depth analysis of rapidly transforming post-communist economies might find inspiration in the process of ‘creative destruction,’ first defined by Joseph Schumpeter in 1942, in describing a period of economic and social restructuring that eventually led to an imbalance in economic development in CEE countries. For a number of obvious reasons, these wholesale systemic changes have caused various problems, for example, shortened time frames for the individual’s planning period. In addition, they have left economic agents inexperienced in estimating the probability of outcomes or the stability of prevailing external circumstances. As a result, unknown long-term costs and benefits are heavily discounted, which often results in establishing a one-off game. While these imbalances have been caused by the conscious economic policy diagnosis of various participants in the political process, they have also produced new, unexpected imbalances, the solution of which requires new major economic policy responses (Mejstrik, 1997; 1999). The resulting historical track record of both wide-reaching economic institutional developments and crucial government policies, as demonstrated, for example, in the key ownership changes of core companies and the efforts made to ensure their long-term political support by a wider constituency, has inevitably influenced the behavior of companies, their corporate governance and their performance.