Corporate Governance by Banks in Transition Economies: The Polish Experience

I — The Literature.- 1 Capital as a Control Device.- 2 The Role of Banks in Transition Economies.- II — The Corporate Governance Challenge.- 3 The Budget Constraint in Transition Economies.- 4 The Framework for Hardening the Budget Constraint and Corporate Governance.- III — The Survey.- 5 Survey Results on Bankruptcy and its Alternatives.- 6 Survey Results on Banks and Corporate Governance.- 7 Policy Implications of the Polish Enterprise and Bank Restructuring Program.- Statistical Annex.

Dr. Arnold Holle promovierte bei Prof. Dr. Paul Bernd Spahn an der Johann Wolfgang Goethe-Universität, Frankfurt/Main. Er ist Investment Manager bei Baring Central European Investments, London.

In developed economies a consensus has evolved that banks should lend money to enterprises, not own them. Emerging economies face a different set of challenges which force us to reconsider the bank-enterprise relationship. In theory banks should play a key role in corporate governance. As a consequence, decision-makers in transition economies chose to emulate the German and Japanese models of bank-enterprise relationships. The empirical study presented here looks in detail at the Polish Enterprise and Bank Restructuring Program, which places banks center-stage. The Polish experience shows the necessity of completely overhauling the bankruptcy laws and institutions at the outset of any restructuring program. Banks need to be privatized before they can effectively exert corporate governance.